Purchasing your first home can feel like you've reached a major milestone in your life. You're excited, you're anxious, you're ready to start house hunting, you're mentally ready. That's so awesome! But are you financially ready? Here are some things you need to do first:
- Check your credit score.
- Find a good mortgage lender
- Find a good realtor.
- Be prepared to start saving your dollars.
- Have you narrowed down a neighborhood?
Savings for Your Down Payment
Now that you've established the starting point, it's time to put things in motion. You will need to put down at least 10% of the purchase price to keep your mortgage, interest rates and fees low.
However, if you can put down 20% that's even better, and you can probably avoid private mortgage insurance (PMI). Today is the day that you go on a strict budget and start saving, here's how:
1. It's hard to miss it if you don't see it
Set up an automatic transfer or direct deposit of a certain percentage or fixed amount of funds to your "mortgage down payment" savings account each payday.
2. Instead of a vacation — make it a staycation.
We are now living in a world where everyone is busy. The problem is that we are spending much time working on unproductive things. To avoid this, take your time, and make a priorities list. Take action first on the things that are more likely to improve your life. By doing this, you can achieve your goals quickly, without burning out, and still have time for your social life.
3. Reduce your monthly debt where possible
If you haven't already, sort out your monthly bills and expenses then eliminate extra curriculum spending such as:
- Purchase an elliptical or do free yoga online and save on that gym membership fee.
- Eat at home, maybe go out on special occasions.
- Stay away from the mall and limit your shopping.
- Buy no frills brands when you go grocery shopping.
- If you can manage it — let go of the cable.
4. If you need a little help, ask your family
Don't live beyond your means for now, remember you're on a strict budget right now. Borrow from family and friends if you need to as you may have a little more leeway and flexibility in repayment.
5. Your retirement plan is there for you
If your company offers profit sharing or 401(k) plan check with your Personnel department to see if you're able to borrow against your savings for the purpose of a home purchase.
6. Let one investment pay for the next
If you have investments that aren't yielding you a return, sell them. Invest those funds into your next investment — your new home.
7. Add to your income
Get a part-time job if you can. An extra income can help boost your account and get you to your goal quicker.
8. Try to negotiate with the seller
If the house has been on the market for a while the seller will probably be motivated to sell quickly.
9. There may be programs that can assist with down payment
There are organizations around that can assist you with the down payment. Inquire with the U.S. Department of Agriculture Rural Housing Services, the Veterans Administration, and the Federal Housing Administration and check with your local housing authority office.
Factoring in Your Closing Costs
Your savings budget will also include all the costs and fees associated with closing. A few things that will have to be done prior to closing are:
Your home will be your pride and joy, and it's probably the biggest investment you'll ever make.