5 Easy Ways to Start Saving for a Home
Families, couples, singles; everyone at some point in their lives make plans toward buying a home. But how much savings do buyers really need to have and how much will be enough? There’s no definite answer to that since factors like down payments, closing costs, or mortgage insurance can differ.
But that doesn’t mean you couldn’t or shouldn’t save up. There are rules of thumb and alternatives for buyers who need extra help. Let’s look at the basics, methods, and alternatives buyers can take to secure enough funding and get through the front door of their dream home.
Tips on How to Save Money for that Dream Home
1) Have a Solid Budget Plan
Easier said than done. The trick is to know where your money goes every month since it’s nearly impossible to put in money for your home if you don’t. The first step is to pool all your finances including income from your spouse, partner, or anyone who’ll be contributing to the purchase. Take note of expenses like bank and credit card statements, necessities, as well as non-essentials like leisure or entertainment. Once you get a hold of everything, you can look for areas to cut back.
2) Set a Target
While there’s no definite answer to how much money you need to save for that dream home, it’s not entirely variable. Setting up a solid and realistic budget plan means identifying a few things to help it materialize. Answering questions like how much will your new house cost including closing costs and mortgage insurance will help you calculate how much down payment you’ll need. It will also help give you a good idea of how long will it take to achieve that goal.
3) Trim Down on Luxuries
It’s kind of an open secret that lifestyle reflects income. Meaning the more you earn, the more you spend on trivial things like subscriptions, memberships, fancy meals, and other luxuries. But getting rid of these non-essentials temporarily can help you save. Picture this, skipping out on cable ($110), restaurant meals ($200), and gym memberships ($60) while reducing your clothing budget ($100) and switching to home goods ($150) can help you save up $15,000 in a couple of years.
4) Hold Back on Retirement Savings (Temporarily)
Scale back contributions for your retirement fund. Getting your homebuying dreams off the ground shouldn’t take you 4 or 5 years. A solid plan can have you all set in a year or two. And before you even think about taking a shortcut by borrowing from your retirement account, remember that you’ll repay it with interest, incur possible penalties for premature withdrawal, or be subject to withholding taxes.
5) Automate Savings
Most of the tips mentioned here require a tremendous amount of willpower but it’s not always enough. Just to be sure, it won’t hurt to automate your savings. Having a small percentage of your monthly paycheck goes into a savings account will help ensure that it’s not spent on non-essential expenses. Putting in tax returns and year-end bonuses can also speed things up a bit. This small step goes a long way while curbing the tendency to spend on unnecessary things.
Saving up for that dream home requires a solid savings plan but you also need to have a solid understanding of your wants and needs as well as how much you need for the down payment and other expenses. If you’re having struggles getting approved for a mortgage, TL Global’s third-party owner-financing program helps you get the home of your dreams and like a bank-approved buyer, you get a 30-year amortization period and fixed monthly rates with the possibility of rebuilding your credit.