Saving money for your first home may seem overwhelming, but don’t let that discourage you! Start with some realistic goals and plans to help with saving for your down payment. Focusing on small steps and building up your savings will help you get even closer to owning your home.
Tips for Saving for your First Home
Step 1: Determine your Current Purchasing Power
Before you create a savings plan, it is essential to have a general understanding of how much money you may need to save. Connect with a mortgage specialist to get pre-qualified and determine how much you may be able to qualify for at the moment. If you want to be eligible for a more considerable loan amount, you can inquire about how much you may need to save to receive that higher amount.
Step 2: Create a Timeline and Make Target Goals
After you speak with a specialist and determine your current and potential purchasing power, you can create a personal savings goal. Make sure the plan is specific, measurable, and realistic. Decide if your savings goal is short-term or long-term and how much money you will need to reach your goal (based on your starting point and desired endpoint). From there, you can focus on the below steps to help you achieve that savings goal!
Step 3: Pay off Debt with High-Interest Rates
Do you have other debt such as outstanding credit card balances, student loans, or car loans? If so, focus on paying off your debt with the highest interest rate first, such as credit card debt. If you focus on paying off that debt now, you may avoid having to pay more down the road because of compounding interest on outstanding balances. Additionally, the faster you pay off your debt – the quicker you will have extra money each month to put into savings!
Step 4: Set up an Interest-Bearing Savings Account or Investment Account with Automatic Deposits
If you are setting aside a lump sum of money each month, make sure that money is accruing interest, whether in a savings or investment account! Determine how much money you spend on monthly recurring expenses, such as rent, groceries, utilities, and other debt payments. Then, determine how much money you have left over each month that you can put into savings. The best way to stay on track with your monthly savings is to set up automatic monthly deposits, so you are not tempted to spend that money and remain consistent.
On the other hand, if you have a substantial amount of money tied up in other ventures, you may want to consider selling some of your investments. That way, you can re-invest that money into a new home.
Step 5: Try to Cut out Unnecessary Monthly Expenses
You may need to make a few sacrifices in the short-term if your goal is to save for a down payment. Some expenses you may want to consider cutting down on include:
- Entertainment & streaming subscriptions
- Gym memberships
- Dining out expenses
Step 6: Consider Getting Down Payment Assistance
For those who cannot afford a down payment by themselves, it is common for them to get down payment assistance from relatives or close friends. This assistance is considered a down payment gift.
If you still have questions or want advice on saving for a house, you may always contact one of our mortgage specialists to see how we can help. GuardHill offers various loan programs with different terms and guidelines, including little to no down payment programs. Get started today!