If you’ve landed on this article, chances are you’re thinking about buying your first house. Congratulations! However, you should know that it is harder to get a mortgage these days than it was long ago. Banks are now requiring buyers to put down more money than they used to have to. If you’re wanting to buy a house, you’re going to have to save quite a bit of money. Here are some creative ideas to help you save, so you can eventually buy your very first house!
•Dictate a monthly budget, and stick to it. It should be a no brainer, but you build savings by spending less than you earn. Therefore, any financial goals begin and end with your monthly budget. It’s important to be both honest and realistic about your spending habits, and then stick with your plan. Electronic bill pay is a fantastic tool, because then your payments take care of themselves.
•Look to your savings. Many people have trouble saving money because they simply see a lot of zeros in their bank account and assume that they are comfortably on track when they are not. It’s very possible that you have less money to spend at the end of the month after paying your bills, than you think you do. The simplest way to avoid this is to create a dedicated bank account just for your housing fund, and then deduct it from any spending.
•Make savings automatic. Once you have a dedicated savings account, let the bank know how much you want from your checking account to go into that savings account each month.
•Save tax refunds and work bonuses. While it’s tempting to splurge a little even as you save a little, building up a down payment requires a lot of restraint. That applies both to your day-to-day expenses, as well as one-time infusions of cash.
•Save big. Sure, you can save a few bucks each week by eating store-brand peanut butter instead of Jif. But you can make the biggest impact by cutting out the biggest expenses. Skipping your annual beach vacation won’t be easy, but snatching big bills where you can instead of pinching pennies is an effective way to build up savings quickly. Read: 10 Ways to Save Money to Buy a House If You Are Living Paycheck to Paycheck.
•Work more. Spending less is the obvious way to save, but working more and bringing home more money is also a great way to supercharge your savings. If you are eligible for overtime or additional work, take every opportunity that comes your way. And if you’re not, consider taking a second job on the side even if it’s only a few days or a few projects each month.
•Ask for support. Much like going on a diet, staying on a strict savings plan is much easier with the support of the people around you. Though its tempting, try to avoid or cut back your shopping trips. Make sure your friends and family know how your behavior is changing so they can meet you halfway.
•Don’t punish yourself. The math of saving for a house may be straightforward, but the emotions of saving are very complex. If saving feels painful or frustrating every single day, you’re much less likely to be successful at it. So, rather than let the frustration build up after you deny yourself every discretionary expense, take comfort in a simple pleasure once in a while. The idea is to save money, not to spend zero, and you will find it much easier to save if you’re actually enjoying your life while doing so. For further reading, see: Buying a Home: Saving For a Down Payment.
Great tips on how to save money! How much exactly do I need for a down payment without having to pay PMI?
Private mortgage insurance helps home buyers purchase homes with less than twenty percent down but, despite its benefits, some consumers aim to avoid their PMI at all costs. For buyers who wish to avoid monthly PMI, there are several ways to go. The first, and most obvious, route is to make a downpayment of 20% or more. With twenty percent equity, PMI won’t apply. This is your best choice, however there are other options to explore.