Thinking about buying a home, but having trouble saving for the down payment?
If you are struggling with saving for your down payment, you are not alone. According to a study by Zillow, saving for a down payment was the top hurdle towards homeownership for more than two-thirds of renters, beating out mortgage approval and job security.
The good news is that saving for a home is getting easier. Today, low down payment mortgages are possible and you may be approved for a mortgage with as little as 3% down, according to Fannie Mae and Freddie Mac, the government-sponsored mortgage enterprises.
It’s time to start saving! These 6 steps will help you start saving for your down payment.
1. Open a Savings Account
If you don’t have a savings account already, consider opening an account online or in person at the same bank or credit union you currently use. This makes it easier to transfer funds electronically and track your progress without hassle. There are even automated saving plans that are available at some banks, making sure saving is a priority.
2. Start Budgeting ASAP!
Today, you can budget using a variety of smartphone apps or spreadsheets. Some apps can organize spending habits into categories, making it easy to monitor your activity. On a spreadsheet, you can review your monthly gross income and subtract living costs, taxes, and other expenses.
Look into different budgeting practices to guide you in your saving and spending practices so you can find what works best for you.
3. Cut Costs
Calculate the amount of money you need each month to cover necessities and assess where you can cut costs and save. If you take out a reasonable percentage of your income each month to put into savings and modify your spending habits, you’ll be able to make the progress you need.
4. Clean Up Your Bills
Pay off what you can from current cards and cut the credit cards you no longer use to avoid debt later on. When applying for any kind of credit, you encounter interest rates.
Before you open up any more accounts, check your current interest rate for all your current bills and accounts. If you make timely payments, you may be able to call to request a lower interest rate.
5. Check Your Credit
It’s time to ensure your credit score is in the right place. Check your FICO score and see how it measures up. If you have good credit, you may be qualified for a smaller down payment and a more favorable interest rate.
If your credit isn’t where it should be, don’t be discouraged – be proactive. Check your credit reports for any errors and take the necessary steps to improve your credit.
Find out how our Home Buyer Solutions Group can help you improve your credit.
6. Make a Plan
Now that you’ve set yourself up for success, it’s time to figure out exactly how much you’ll need to save and how long it will take to get there. Meet with a mortgage professional to discover your options and what kind of mortgage you may qualify for.
Once you establish your goal, it will be easier to make progress and keep your finances on track. Buying a home can be a long process, but with determination, you will see results. Through saving for your down payment and applying for a mortgage, you prepare yourself for the responsibility of homeownership. By the time you’re moved in, you’ll be able to take pleasure and pride in your accomplishment as a new homeowner.
By Kaylee Fantis