While renting may sound like a more affordable option than buying a home, in many markets, it is not. Buying a home is the American Dream but for many people it can feel like an unattainable financial goal. It is far from cheap to buy a home but it is also very achievable when you budget and save. Though it is always best to put as large of a down payment on a home as possible, borrowers can put as little as 3% down if they qualify for certain loans. Ideally, to avoid private mortgage insurance, a borrower will have saved enough to put a 20% down payment on a home. For a $300,000 home, that means that you will need to have saved $60,000 for a down payment. With a thorough budget and diligent saving, you can save for the down payment you need on the home of your dreams.Verify your mortgage eligibility (Aug 12th, 2022)
The first place to start when budget and saving for a home is to look at what expenses you can eliminate. Do you dine out frequently? Even if it is to fast food restaurants that can add up. By making more meals at home or packing lunch to take to work you can save quite a bit more money. Budget a certain amount of money towards dining out each month and be diligent about sticking to that budget, whether you dine out 3 times at a fast food restaurant or once at a fine dining establishment. Next, do you spend a lot of money on entertainment and activities? If you go to the movies frequently or have an expensive gym membership there may be ways to cut back by going to to cut back to cut back on or eliminate these expenses, at least temporarily, to grow your savings more quickly. Even by making small changes such as switching to store brands rather than name brands you can multiply your savings more rapidly. Each superfluous expense you eliminate will make an impact.
Next, it is important to look at your debt. If you have high interest debt such as credit card debt, it is a good idea to pay that off as quickly as possible. Once you have it paid off you will be able to save all of that money you were paying towards the debt and interest and put it in your savings account. Additionally, by eliminating debt you will make your mortgage application more appealing and possibly qualify for a larger loan and better interest rate. Additionally, if you have any loans or debt that can be consolidate or refinanced it may reduce the amount you owe and make it possible to add more to your savings each month. These are just a few ways to begin budgeting and saving for the down payment you need for a new home.Show me today's rates (Aug 12th, 2022)