Why a Down Payment Feels Like a Wall
Buying your first house can be exciting, but before you can start to tour potential homes, you need to save a reasonable down payment. Large down payments are the number one reason why people struggle to get on the housing market, but they don't have to keep you from securing a mortgage forever. The following are a few useful tips that will make paying your down payment an achievable financial goal.
Look at What You're Paying in Rent
If you want to invest in a home, you might need to downsize temporarily to make that happen. Sometimes reducing your rent is the best way to free up cash. If you can save a hundred or two a month, that could accumulate to an extra $2,400 a year — which adds up in just a few years to become a sizable part of your down payment fund. It may mean less space or commuting slightly farther, but when you step across the threshold of your own home, it'll be worth it.
Decide What Matters More Right Now
Downgrading your rent is just one example of how you can reframe your priorities, but there's more you can do to reduce the time it takes to start looking at mortgages. Look at your monthly budget and cut down or even eliminate excess spending. For example, if you eat out frequently or take vacations often, then it may be time to pare down to eating out once a month and only one family vacation. Once again, while it may be less entertaining for a year, it will pay off when those small decisions get you into a home.
Build a Budget That Actually Works
One of the top reasons young professionals don't easily obtain mortgages is that they're not adept at financial planning. If you don't yet have a budget, now is the time. Attempting to save on the fly is a near impossible task. While you need to be mindful of your goals during your everyday life, you also need to create a budget that helps you support the bigger goal of becoming a homeowner.
Consider Going Down to One Car
If you and your partner currently have a car, it may be time to consider ride splitting or making use of public transit more. Maintaining two car payments can be costly, and cutting out one altogether can quickly help you save thousands of dollars in just a year's time. When added to your lowered rent, this can make a powerful impact on your monthly finances and make an eventual mortgage much more affordable. Keep in mind that you're not only saving on your monthly car payments but also on maintenance, car insurance premiums, and gas.
Talk to a Mortgage Broker Before You Think You're Ready
Securing a mortgage can be daunting, but sometimes there are programs for first-time homebuyers that can help alleviate some of the pressure. Even if you're not yet ready to buy a home, it's a good idea to set up a meeting with a mortgage broker. They can help guide you through your options and also help you get a realistic idea of how much you need to save for a viable down payment. Having tangible numbers in hand can help motivate you to work harder — and smarter — toward your goal.
