Buying a home has many advantages over renting.
It helps you build savings, will be your biggest asset and creates stability for you and your family.
The number one reason first-time home buyers have for not having a mortgage is that they aren’t sure they have enough money for a home.
Here are some expert money-saving tips that will teach you how to save money for a house that anyone can use.
1. Create a Budget
It’s easy to overspend when you’re not keeping track of what you buy. A budget is one of the easier ways to save money because it helps you understand where your money is going and helps you stick to your savings goal.
Calculate everything you need to live a comfortable life and have the bills paid and stick to the budget. This will help ensure you do not continue to overspend.
2. Automatic your Savings
You can automatically have money deposited into your savings account. Either from your bank or through your employers direct deposit. This is a great way to save money without even having to think about it.
Moving from a larger more expensive rental into a smaller cheaper rental can save you hundreds of dollars each month. That money can go towards saving for your down payment on a house.
4. Pay Down your Credit Card Balances
While it may seem counter-intuitive to pay more towards your credit cards than your savings, it will actually help you in the long run. By paying down your card balances you will save yourself from paying additional interest.
Not only will lower credit card balances look better when it comes to getting a mortgage. Lower card balances equals a higher credit score, making it easier for you to qualify for a mortgage.
5. Supplement your Income
This could mean getting a second, or third job. Or it may mean start selling old stuff around your home, or buying and selling things you find at garage sales. There is always something you can do to earn a few extra bucks.
Local restaurants are always looking for help. Being a waiter, or waitress is a great way to earn extra cash. In just a few hours per week you can earn hundreds of dollars in tips.
6. Refinance your Debt
If you have any types of loans, such as an auto loan or personal loan, you can save money by refinancing them into a lower rate.
Not only will refinancing lower your rate, it will help you pay the balances off quicker. Again this will help your mortgage application look much better when it comes time to get a mortgage.
7. Netflix and Chill
Going to movies these days can cost a fortune, especially if you have kids. If you don’t have Netflix, then you should. For just $10 per month you can get access to thousands of movies and TV shows. This can take the place of going to the movies or out for expensive night outs.
8. Get a Roommate
If you have a spare bedroom where you’re staying at now, you can rent it out for good money. You can charge hundreds of dollars per month to someone needing a place to stay. Having a roommate isn’t ideal, but that is free money that will help accelerate your savings.
9. Do a Balance Transer
If you have credit card debt it can be very difficult to get out of debt while paying interest. There are plenty of credit cards that offer balance transfers that come with a 0% interest rate for 12-18 months.
By transferring your balance to a 0% rate card you can pay off your balance much faster and save yourself some money in the process.
10. Move Savings to an Interest Bearing Account
If you have money that is just sitting in a savings account, you’re losing money. Some savings accounts do give you interest, but it is very minimal.
Speak to a financial advisor to see if your money will work better for you in a mutual fund, or other interest bearing type of account.
11. Lower Your Bills
You can save quite a bit of money by calling your service providers to find the best plan for you. This could be your cable or internet provider, cell phone, auto or health insurance.
You may be paying more money can you could be. A short phone call to your service providers can go a long way in lowering your monthly bills.
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How Much Money Do You Need to Buy a House
When you get a mortgage there is a certain amount of money you’ll need to have in savings. There are a few upfront costs associated with getting a mortgage, such as a down payment you will need to be ready for.
Money for the down payment
The downpayment on a mortgage is a percentage of the purchase price that will you pay up-front. Most conventional mortgages require between 5%-20% down.
There are some home loan options that have low or no down payment options. FHA loans are a very popular type of mortgage among first time buyers because of their low down payment requirement.
You can qualify for an FHA loan with just a 580 credit score and a 3.5% down payment.
For example: On a $200,000 home you will need $7,000 as a down payment.
A home appraisal is an estimate of a property’s market value that is used by the mortgage lender to help determine loan terms. The appraisal is done before closing and is paid for by you, the buyer. The average appraisal cost is between $300-$500.
Closing costs are various fees charged by the lender for completing the loan. Loan origination fees, credit report, title, survey, loan application, etc.
Average mortgage closing costs are somewhere around 2%-4% of the total loan amount. Most lenders will allow you to finance these costs into your loan so you do not need to come out of pocket.
First-Time Home Buyer Programs
If you’re a first-time homebuyer there are many programs that can help you become a homeowner. There are local and state down payment assistance programs and grants you may qualify for.
You can search for these programs on your local city or county Government website, or go to the HUD website.
Know what you can Afford
There are other costs involved when you’re a homeowner besides your monthly mortgage payment. There is homeowners insurance, mortgage insurance, HOA fees and property taxes.
You need to make sure you take all of these costs into account when deciding to get a home loan. What you can afford will depend on your debt-to-income ratio, which is the amount of your debt obligations compared to your monthly income.
The Bottom Line…
There are a million ways to save money for a new home. The important thing is that you save enough money so you can afford the down payment plus have enough left in savings so you don’t go broke.
Once you have saved up enough money it’s time to speak to a qualified loan officer about your mortgage options.
How will you save up money to buy your first home?