The housing market has seen some low points over the years. The job market is beginning to improve, and interest rates are still at historic lows, many Americans are seriously considering purchasing a home at this time. For many people now is a great time to buy.
The easy money days of the mortgage lending have passed, and many banks are requiring that people put down a larger down payment. They have stricter requirements, and additional money is going to be needed.
The average price of a home in the United States is $212,400. Even if a person only has to put 5% down this is still $10,000 they need to have at closing. Depending on the lender, credit score, and real estate market, you may need to put out even more money. If a person is looking to spend more on a home, they are going to need bigger saving.
If you are looking to buy a home anytime soon, you need to have some money saved up. Here are ten steps to help you increase your savings to purchase a home.
Create a Budget
You can save money but spend less of it. You need to develop a budget for the month. It is important to be open and realistic about what you are spending money on. You need to stick to their budget as closely as possible. Electronic bill pay can help with this since the payments are automatic. You can also print out your expenses and check them off as they get paid. Sticking to a monthly budget will help make sure that all your current bills are paid, and you can put money into savings as well. This will also allow you to track what you are spending money on. You can make reductions in your spending as needed as well.
Hide the Savings
Many people have trouble saving because they think they are on track when they are not and may overspend. To do this have a separate bank account just for savings and then hide it. You will still need to use your checking account for bills, but the savings is off limits no matter what happens. Once the money is in the account forget that it is there for the time being.
Once you have opened an account for savings, tell the payroll department at work that you want a certain percentage of your paycheck automatically deposited into this account. The remaining balance will be deposited into your checking account. This way you will not even notice the missing money if you stick to your budget. Pay yourself first, so you do not have an excuse as to why you were not able to save money. If savings are directly deposited into a separate account, you do not even have to think about it.
Save the Extra
If you get a tax refund or a bonus save it in the savings account. While you may be tempted to spend this money, put it right in the savings account. This money will help the savings build up even faster.
Save in Large Chunks
It is nice to save a little more here and there. Everyday savings are nice. You can have the biggest impact but cutting down on the biggest expenses. Skipping a vacation is not easy, but it can help build up the savings account quickly. This will allow you to save hundreds or even a thousand dollars at one time.
Downgrade Before Upgrading
Moving to a smaller apartment can reduce your rent by 20% to 30% each month. If you do not have children living in a smaller apartment before purchasing a larger home can help you save. There will also be fewer things to pack when moving.
Working more hours and bringing home more money will add to the savings. If you can work overtime, take each offer that you can. If overtime is not an option, consider getting a second job or work side jobs to help make some extra money.
Reduce Retirement Savings
This goes against traditional advice. If you have a “401k plan at work, you should still put enough in the account so that your employer will match it.” says Mike Chang, a chartered professional accountant Pitt Meadows expert. Employer matching usually stops around 6%, so, for the time being, you can put less money in your retirement account. These funds can go towards your home down payment. A home is an asset. A home can be a way for saving for the future. If you are a first time home buyer, you may be able to use the savings in your IRA for the down payment. You can withdraw around $10,000 penalty free from your retirement account if you are purchasing a home.
Look for Support
Going on a savings plan will need the support of people around you. Friends and family may invite you to go shopping with them, and that can be tempting. Make sure they know you are saving money for a home so they can give you the support you need and reduce the temptation to spend money.
The math to saving for a home may be simple, but emotions are anything but simple. If you have a hard time saving you are less likely to succeed at putting money aside. Rather than letting the frustration and the anger build up inside you do not deny yourself everything you enjoy. Take comfort in some of the small pleasure in life. You can spend on these things once in a while. Instead of eating out often, try cooking a fancy dinner at home once a week. You will still be able to save some money. Instead of going out to the movies often, use Netflix instead. This will still cut down on your entertainment expense. You are trying to save money, not deny yourself of every pleasure in life. You will have much more success if you are enjoying the little things in life while you are saving. You will also have a higher success rate.