When you’re a first-time home buyer, the home-buying process can be a challenging one to understand. There might even be times when you feel overwhelmed. This is all normal.
There are several essential steps to take when preparing to buy a home and failing to understand just one of those steps could put you in an undesirable position. One of the first things to understand about buying a house is home budgeting. Saving for your first home is one of the beginning steps to take, if not the very first.
In the guide below, you’ll find several helpful tips to prepare first-time home buyers for the saving process. Continue reading below to learn how to save up for a home. Let’s get started!
1. Figure Out Your Budget
Before you can save for anything, you must first figure out your budget. How can you determine what your budget is? First, you’ll want to sit down and go over all of your expenses versus your income.
How much money do you have leftover each month after paying all your bills and necessary expenses? This amount will determine what your budget is. Be sure to factor in costs of groceries, gas, and some extra spending money each month as well.
You don’t want to put yourself in a position to have no money left at the end of each month after purchasing your home. If you’re currently paying rent, then you can add that amount to the money you have leftover after expenses since you won’t be paying rent and a mortgage, hopefully.
Once you determine your budget, you can then begin to understand how much house you’re able to afford. This will help with your price range when browsing listings online.
2. Set Realistic Financial Goals
Without goals, it’s difficult to get where you want to be in a certain amount of time. How much money will you need for a down payment? In most situations putting down at least 20% of the home’s cost is ideal.
Know how much you’ll need and then set realistic financial goals for yourself to ensure you get there. To do this, have a big picture in mind. Let’s say you need $15,000 for the down payment.
Decide how long you want to give yourself to reach that one large goal. Let’s say you want to save that down payment two years from now. That’s your big goal.
That means you’ll need to save about $145 a week or roughly $580 a month to reach that goal. That’s your smaller goal. Now, how can you make sure you’ll reach that weekly or monthly goal?
Are these goals realistic for you? If not, what can you do to make them more realistic? Your first step might be to start cutting back on bills.
3. Start Cutting Back on Bills
We know what you’re thinking: if you could cut back on bills, then you would have done it a long time ago. You might be surprised, however, to learn these few tips. A great way to start cutting back is to simply cancel anything that’s not necessary.
Here’s what we mean by that. Cable, theme park passes, monthly subscriptions, and anything similar is not a necessity. These are all luxuries.
Although they’re great to have, if you’re serious about buying a house, then start canceling them now so you can put all of that money into saving for your first home. When it comes to your insurance bills, do some shopping. You might be able to find cheaper rates with a different provider.
Phone plans can also be reduced by removing any extras you might have or by downgrading to a cheaper plan. It’ll all be worth it in the long run when you’re sitting comfortably in your new home.
4. Open a Savings Account
Now that you’re ready to start saving, you’ll want to open a savings account specifically for your house. This savings account should be separate from all others. Speak with your bank about different savings accounts options they have available for you.
Some banks or credit unions will offer savings accounts with higher-paying interest when saving for a large expense such as a car or house. Then, be sure to ask about automatic savings. When you set this up, money will come out of your account each week or month (depending on how you set it up) and go directly into your savings account.
This is a great way to make sure you don’t forget. Plus, you won’t have to look at the account as much, which means out of sight, out of mind. Act like the money was never yours to spend.
5. Look For a Second Job
One of the best ways to save quickly for a home is to look for a second job or a side hustle. Any money you make from this second source of income should be deposited into your home savings account before your hands ever touch it. If you’re not sure where to begin, there are a few different options.
You can decide to get a second job at any reputable business that works well with your schedule. Make sure they’re able to give you part-time hours to work around your current work schedule. Something at night or even just on the weekends might work well.
Another option you have is to work for yourself. These types of jobs are great side hustles that you can do whenever you’re able to. For example, you can sign up on a dog-walking app to walk or dog-sit dogs in your free time.
You can babysit, refinish furniture found at thrift stores and sell for a profit, sell your unwanted clothes, and so on.
6. Pay Off Your Debts First
It’s important to note that any debts you have should be paid off first before you try to start saving for a home. Paying off these debts will help build your credit and will also help you save for your home. If you’re already in debt from other expenses, then it could be difficult to save up for your home.
Pay these debts off first and then use the money you’d normally put towards those debts to save for your new house. In the meantime, as your credit grows, you’re also helping your situation since a high credit score can usually get you a loan with a lower interest rate, higher amount, and longer term.
7. Work on Your Credit Score
There’s no better time than now to start working on your credit score. If your credit is less than ideal, then you’ll want to build it by paying off all your high-interest loans first. Pay all your loans on time, but put a few more dollars towards the ones that need to be paid off first.
An extra $10 or $15 a month can go a long way. If you’re lacking credit, then you can build credit by taking out a credit card with a low amount. A $500 credit card won’t put you into any major debt and can be used each time you pay for gas.
Use the credit card and then transfer the money back to the card as soon as possible. If you do this each time, then you’ll quickly build your credit.
8. Check Out First-Time Homebuyer Programs
There may be first-time homebuyer programs available to you in your area. Before you begin the home buying process, be sure to look into first-time homebuyer programs near you. These programs can help first-time homebuyers with down payments, closing costs, and more.
Take your time to conduct some research and know what resources are available to you.
9. Prepare For Extra Costs
You don’t want to be surprised by all the extra costs associated with buying a home, so it’s better to learn about them now. Prepare for these extra costs by saving for them separately. Some costs to prepare for are maintenance costs, repairs, closing costs, cost of insurance, cost of a home inspection, and more.
If you plan for these costs in advance, then you won’t have to worry about being surprised by anything during the buying process.
Home Budgeting Is Essential When Saving For Your First Home
When preparing to save for your first home, you need to understand home budgeting. Saving for your first home can be challenging at times, but with all the best advice, you’ll have your dream home before you know it!
Are you in need of urgent cash now? Do you need a loan but have bad credit? There’s no need to worry.
24Cash.ca is here to help. We’re a Canadian online credit brokerage corporation that doesn’t conduct credit investigations. That means we can help you today no matter what your credit is.
If you need help with finances, then request a loan today to see how we can help you.