In the United States, homeownership is a lifestyle that many people aspire to. The benefits of owning your own home are numerous: from feeling as if you’ve made it in life to being able to customize and personalize your living space as you see fit, there’s something for everyone when it comes to buying a home. What might not be so apparent about homeownership is that it often requires significant financial resources.
When was the last time you heard someone say they bought their first house with money saved up from their jobs? With mortgage rates at all-time lows and housing prices on the rise, now is a great time for prospective home buyers to start accumulating savings for this major purchase. But how exactly do you save enough money for what will likely be the largest purchase of your life?
1. Determine how much home you can afford
It might seem like a good idea to buy as big and nice a house as possible, but reality often doesn’t play out that way. The amount you spend on housing should be no more than 30 percent or less of your gross monthly income (income before taxes). If this means buying a small home, so be it. You’ll thank yourself later when mortgage payments aren’t eating up all of your paychecks.
2. Know what price range you’re looking in and work with real estate agents who know the area well
There is nothing more important than finding an excellent real estate agent because they can help guide you through the entire home buying process. Your agent should be able to tell you what neighborhoods have the best prices and what type of homes you can afford within your budget.
3. Save on costs by cooking at home, biking, or taking public transportation instead of driving, and cutting back on unnecessary spending
This one is a no-brainer: The more money you can save each month, the more quickly you’ll be able to accumulate funds for a down payment on a house. Try cooking at home instead of eating out, biking, or taking public transportation instead of driving, and canceling subscriptions to services you don’t really need (like Netflix).
4. Make extra money by picking up odd jobs or starting a side hustle
If you’re really serious about saving money for a down payment on a home, you might need to get a little creative. One way to make extra money is to pick up odd jobs or start a side hustle. This could be anything from dog walking to freelance writing.
5. Work with a financial planner or a mortgage broker to better understand the home buying process
Before jumping into homeownership, you’ll want to understand all of your financing options thoroughly. An excellent way to do this is by working with a financial planner or a mortgage broker who can help you determine what type of home loan is best for you and how much money you should be saving each month to reach your long-term goal.
6. Stay disciplined and be patient
There’s no doubt that saving for a down payment on a house can be difficult, but it’s important to stay disciplined and be patient. Rome wasn’t built in a day, and you won’t be able to buy a home overnight either. It’s a long process that will require some hard work, but it will be worth it in the end.
7. Have a backup plan in case you’re unable to buy a home right away
Unfortunately, there are no guarantees in life. What if you can’t find a home within your budget, or what if the market crashes and your house is worth significantly less than you paid for it? That’s why it’s crucial to have a backup plan in case you’re unable to buy a home right away. This could mean having enough saved up to rent for a year or two or even living with family or friends until you’re able to purchase a place of your own.
8. Celebrate each small victory along the way
Buying a home is a long process that requires lots of patience, hard work, and dedication. Don’t get discouraged if you’re not able to buy your dream home right away; celebrate each small victory along the way (like saving enough money for a down payment or speaking with your financial planner about what type of loan is best for you).
Saving for a down payment on a house can be difficult, but with these eight tips, you’ll be well on your way to making the lifestyle of homeownership a reality. Follow these tips, and you’ll be able to buy the home of your dreams in no time.