Some home buyers are able to purchase their first home for as little as three percent down or less. However, three percent on a decent home can still cost a small fortune. In some markets, it may equate to tens of thousands of dollars or more. You also have closing costs to pay for when buying a new house, and these can easily cost you another three percent of the sales price or more in some cases. Saving up enough money to purchase your first home can seem like an impossible feat, but you actually can accomplish this goal if you put your mind to it. These steps can help you to reach your goal more easily.
Determine Your Goal
Establishing a financial goal gives you a target to reach for, and it can help you to more easily focus on saving. First, research homes that you would like to purchase, and pay attention to their approximate sales price. Then, research loan programs that you may qualify for, and pay attention to the down payment requirements. Using this information, you can determine the approximate amount of money you need to save as a down payment. In addition, factor approximately three to five percent of the sales price for closing costs. It is always better to estimate on the high side so that you are not caught off guard by extra expenses. In addition, most lenders want to see that you have at least three to five months of the estimated mortgage payment available in savings after the down payment and closing costs have been taken into account. When you add all of these figures up, you will determine your financial goal.
Create a Detailed Budget
Now that you have a firm goal in mind, you need to review your monthly budget. Some of the most financially successful people have a rolling budget that extends for many months. This is because expenses can vary from month to month, and an extended budget gives you the opportunity to budget for these fluctuations. Take time to look for ways to trim back your expenses. For example, you could shop around for more affordable auto insurance or switch from cable TV to Internet-based programming. Many people can easily trim several hundred dollars or more from their budget with proper effort. Allot this money toward regular savings. It is wise to include a line item in your budget for savings and to consider this is a necessary expense.
Make Automated Savings Transfers
Some people find it difficult to adjust to saving money. It essentially takes a large chunk of money out of your budget each month. However, when you scale back your regular expenses, such as by eliminating your cable TV plan, you do not necessarily need to adjust your lifestyle and regular spending habits to save money. You can easily set up an automatic savings transfer that moves the money to your savings account on each payday. This way, within a few months, you will easily become accustomed to saving money.
Save Your Windfalls
Many people receive windfalls throughout the year. For example, you may receive a production or holiday bonus from work, a tax refund or holiday or birthday presents in cash. In some cases, this can add up to several thousand dollars or more over the course of a year. Rather than spend this money, add it to your savings account. This is a great way to see an instant increase in your account balance. In addition, if you receive a raise, increase your savings transfers by the amount of your raise. This way, you will increase your savings contributions regularly without impacting your current lifestyle.
It may take you several years to save up enough money to purchase a house. When you follow these steps, you will see your savings account balance grow over time. Eventually, you will reach the goal you have established.
David Glenn is a home improvement expert. He occasionally freelance writes about home maintenance and DIY home repair. He’s also knowledgeable about topics like how to improve social presence and building a reputation online.
