How to Save to Buy a Home
Photo by micheile henderson on Unsplash
Part 1 of Our Two-Part Series:
According to the National Association of Realtors, the most difficult step for buyers is saving for a down payment.
20% down is the market standard- although you may qualify for as little as 3.5% (FHA). It’s still a daunting challenge for many buyers to save even that 3.5% for a $300,000 purchase - which would amount to $10,500.
So, what do you do?
Here are The Milestone Team’s first five tips to get you on the road to home ownership and your own special place in the world:
- Create a vision board. Using a corkboard – or even your refrigerator! – display images of beautiful living spaces, décor you love, gardens you would want. The inspiration helps you prioritize saving for your special place versus spending impulsively.
- Get on a budget.Review and reduce your spending to maximize your monthly savings. Some ideas:
- Choose a “staycation:” Vacations can cost $2000 or more for a typical family. Check out local events, places to explore & stay, and put that extra cash towards your downpayment!
- Try a no-spend challenge. Each month, only spend on necessities and a few dollars for fun-money.
- Pay yourself first. Financial experts recommend “paying” yourself by setting aside 20% from each paycheck. Automate your savings by setting up an automatic transferwith your bank.
- Pay off debt. This seems counter-intuitive – “Shouldn’t I be saving every dollar towards my downpayment?” Every dollar that’s not costing you, yes. Paying off high-interest credit cards and auto loans not only saves you on interest each month, but also reduces your debt-to-income ratio and increases your credit score – which will help you qualify for your mortgage.
- Bank your next raise or tax refund. Yes, you really want that new flat screen television – but making the temporary sacrifice adds those extra funds to your down payment account!
Want more expert advice to save for your dream home? See our Part 2 later this month!