You have decided you want to buy a new home but you do not have enough money saved up. What now? Here are some suggestions to help you save money, hopefully without changing your lifestyle too much!
The first thing you need to do is set a goal. How much do you need saved? Ideally you will want at least 3% of the sales price plus closing costs set aside. So think about how much you plan to spend and then work towards those numbers. Remember there may be options for down payment assistance depending on where you are buying and if you are a first time homebuyer. Home prices should not increase much this year – at least that is what we are hearing. But if you were looking at the beginning of 2022, we also expected interest rates to increase but not to double, so no one truly knows what will happen until it’s too late!
How to save money? There are many different options. Some people move in with parents or get a roommate to truly cut down on expenses. Others give up a vacation or even get a second job to save money. Those ideas may not be available to everyone so what else can you do? Set a budget to help you set money aside. One suggestion I give a lot of clients is think about what your new house payment will be. More than likely it will be more than you are currently spending on rent or your current mortgage. So take the difference between your current payment and the new one and put it into savings. That way you save money and also get used to living with the new payment.
Another option is to automate your savings. See if you can put money directly into your savings account from your paycheck. That way it never hits your checking account and you don’t see it. Ideally put it in another bank so it’s available in case of emergencies but may take a few extra steps to get the money into your checking account.
Do you get bonuses? Or maybe you have a tax refund coming? Those are easier to put aside as it’s not money you use every month. Are you getting a raise? See if you can take the extra money from your raise and put it directly into a savings account.
Look for a savings account that is paying a higher interest rate. There are many banks that have a high yield savings account that pays out a higher interest rate. Check your bank and a few others to see if that is an option.
Look for different down payment assistance options. There are different programs that offer down payment assistance. Some don’t require you to be a first time homebuyer. Many have income limits but you may find an option that works for you. Ask your lender if they know of any programs in the area you are buying in.
Remember you don’t need 20% down to buy a home. You can also ask the seller to contribute towards your closing costs. That was harder to do last year, but I am seeing it happen now. It’s hard to say if it will continue as we get into the spring market, but it never hurts to ask. Gift money may also be an option if you have a family member that is willing to help you.
There are lots of ways to put aside money if you have a goal. If you know you want a new home, that may be the best way to push yourself. Maybe put a picture of the home you want on your refrigerator as a reminder that you are going to reach your goal! You can do it!