One of the most important things to consider before buying a home is affordability. And in today’s harsh economic landscape, many tenants feel they simply can’t afford to invest in a home due to the increasing costs of living around the world.
However, as the costs of living increase, the property market has turned into a buyers’ market, with property prices falling notably in the past few years.
Moreover, if you’ve been looking into real estate in the US and wondering how you can become a first-time homeowner without upsetting your financial well-being, we’ve listed some savvy savings tips that could empower you to buy your first home a lot sooner.
Determine How Much You Need To Save
Unless you have worked out a specific savings target that can be broken down into monthly, or even weekly savings, you’ll have a hard time staying motivated and keeping track of your goal.
So, the best first step is determining how much you will need for your down payment to secure a mortgage loan. The general consensus regarding down payments is that you should save at least 10% of the home’s total value. But it’s typically best to save at least 20%; otherwise, you’ll also need to budget for private mortgage insurance premiums to secure your mortgage loan.
Once you have the amount jotted down, break up the figure into saving installments, and open a separate saving account for these funds.
Set-Up Auto Transfers To Your Savings
It’s easy to decide you don’t need to save money this month, especially if you’ve already built-up a few months of savings for the down payment. But instead of letting yourself fall off track, it’s wise to set up auto transfers to your savings account.
This way, you won’t be able to skip a payment to your saving account, and you’ll thank yourself later.
Choose A High-Yield Savings Account
It’s also wise to save your down payment in a high-yield savings account. Some saving accounts can add as much as 2.61% to your total funds each year, which means you’ll earn some money just for saving, and this will help you reach your target goal a bit sooner.
Temporarily Reduce Your Retirement Savings
Even though it’s crucial to save for retirement, you can opt to move funds around a bit while saving for your home. Instead of saving the total monthly amount for retirement, shift a small portion of these funds to your down payment saving account.
Consider Starting A Side Hustle
Lastly, another excellent way to maximize your savings for a down payment is to consider a side hustle. There are tons of lucrative options out there that won’t demand too much of your time; you could sell stock photos, transcribe audio, rent your car out, test products, start freelancing or even open your own e-commerce store to buy and resell goods. With that said, another savvy way to save more and buy a home sooner is to evaluate your monthly expenses and identify areas where you can downscale for a while. You might find you’re spending too much on utilities or overspending on entertainment.
