Saving Up for Your First Home

If you want to own a home someday, now is the time to start saving for it. If you experience financial setbacks, it might seem like you will never be a homeowner. The good news is that it’s not as impossible as it might seem. If you’re wondering how you’ll pay for it, there are a few steps to simplify the process.

Consider Refinancing Student Loans

It’s a good idea to look into how to refinance student loans and customize your new loan. By doing so, you can choose the loan term and simplify payments by combining them into one lump sum each month. By having a lower payment each month, you won’t have as high of a debt-to-income ratio, which means it might be easier to get a mortgage in the future. Or you could pay the loan off faster. Unlike refinancing your mortgage, fees are typically less to refinance student loans. There usually aren’t prepayment fees, but just make sure to read the agreement carefully to ensure you understand the associated costs. For example, if you don’t make payments on time, you may incur late fees. 

Control Other Debt

Usually, your housing costs shouldn’t be more than about a third of your income. But if you have other debt, like credit cards or a car loan, that might limit what you can put toward the mortgage. You might want to pay off some of this debt to reduce the financial pressure in the future. It can also help you get a better rate on the mortgage. It might not sound intuitive to pay off existing debt first, but it could free up hundreds or even thousands of dollars. 

Save Money First

A common mistake is to wait until the month is over before determining how much goes into the savings account. But that’s the worst thing to do because you might find that there isn’t anything left over. If you’re serious about saving up for a home, you’ll have to set aside money first. While it can take some time to get used to, you’ll begin to adapt to this habit. It might be tempting to dip into savings if you want to make a big purchase but keep this money for its original intended purpose. If the money is too tempting, consider setting it aside in another account. You might look into using an online bank, some of which have better interest rates than traditional ones.

Significantly Reduce Expenses

It might feel like you’re already living from paycheck to paycheck. If that’s the case, begin reducing your expenses by about 10 percent. For example, if you normally spend $500 each month on groceries, reduce it by 10 percent to bring it down to $450 each month. Or you could try canceling subscriptions to bring down your entertainment budget. While the difference isn’t huge, it can add up if you apply this method to each expense each month. Soon, you will have enough money for your down payment. Just remember that it takes time. It isn’t a sprint, it’s a marathon.