Tired of renting? We get it. The pressure to buy a house right now is real, particularly as rental costs continue to rise.
All of your friends are buying homes, and you’ve heard the market is actually good at this time. Plus, you’re really sick of paying rent simply to walk your puppy down three flights of stairs multiple times a day. Paying that much cash, you should at least get a garden!
There is just one problem: you do not have a down payment for a house yet. And it gets harder and harder to save for one when your rent keeps going up. Higher rent costs hurt in lots of ways, including your ability to spare. And you are not alone. Builder Online estimates that it would take young Americans over seven years to save up a 10 percent down payment. No wonder you are feeling overwhelmed!
Listen, saving up a down payment is tough, but you can do it!
Before you save a penny for a down payment, you ought to be debt-free and possess a fully funded emergency fund of three to six months of expenditures. Freeing your earnings from debt obligations and having the ability to turn big emergencies into minor inconveniences puts you into a place of financial security. Then you can start putting some money aside toward a new residence.
You might think you are”throwing money away” by renting. But if you’re focused on your financial goals and have a strategy in place to meet these goals, you are not trashing cash–you’re setting yourself up to acquire long-term using a strong financial foundation.
This type of wise cash behaviour sets you to make homeownership a boon instead of a burden.
Down payments = lots of cash. It is simpler than you think when you have a plan!
1.How much should I save for a down payment?
If you can’t pay cash for your house, plan to put at least 10% down. If it is possible, go for 20%. Why? Since putting down 20% means no private mortgage insurance (PMI)–an excess price your creditor tacks to a monthly payment only in case you don’t make payments on your loan. You want a 15-year, fixed-rate mortgage that is no more than 25% of your monthly take-home pay.
2. Just how long can it take me to save for a down payment?
Because the more time you spend saving up, the more money you can save up. And the more money you save, the less your mortgage will cost in the long term. Stay focused and you should be able to save a great down payment in two to three years. Try not to drag it out much longer than that, though. You’ve got plenty of additional money goals to take on next–like your retirement along with the kids’ college money.
3. Where’s the ideal place to put the money I’m saving for a down payment?
In most cases, a deposit is not an investment. So stashing that cash in a money market savings account will get the job finished. You’re not going to make tons on interest, however you won’t eliminate money either.
4. What are some expenses I should cut in my budget?
You’ll be amazed at how much money you find when you pay attention to your spending. Here are some ideas to help you tighten your spending temporarily while you work on making that home dream a reality:
- Take a break from the gym
- Save eating out for special occasions
- Trim your clothing budget
- Buy generic brands at the grocery store
- Cut the cable
- Press pause on retirement savings
- Drop the summer vacation
5. What can I do for extra income?
- Exercise regularly? Walk neighborhood dogs after work or referee sports leagues on the weekend. Get healthy and bring in some dough? That’s a win!
- Have a heart for teaching? You can expect to make $30–40 an hour tutoring—even more if you live in a big city or have advanced degrees.3
- Love pets? Let your friends and coworkers know you’re available to watch Rover the next time they’re out of town. Get some fur therapy and make money at the same time.
- Do you have a lot of extra stuff collecting dust around your house? Sell. It. All.
- Got an annual bonus or raise? Stash that money in savings instead of spending it else where.
These tips could save you every month! Now get creative and think up even more ways you save!
When you have worked so hard to save up a large down payment, the very last thing you need to do is create a poor financial investment. That is why choosing an experienced property expert –that has your very best interest in mind –is essential.
Our Realtors at Preferred Properties of Texas are a few of the finest at the business, and they assist first-time house buyers and turn your homeownership goals in reality.