Buying your first home is an exciting prospect, but many of us aren’t in the financial position to think about it. In fact, 39% of Americans don’t even have $400 stashed away for a rainy day.
Affording a home can seem near to impossible when you have to make a substantial downpayment. Unless you have a plan in place to secure the money you need, buying a home can feel like an unreachable goal.
If you’re hoping to buy a home in the near future, take a look at some of these expert tips for making it a reality.
1. Examine Your Budget
There’s no denying that saving money to meet a goal requires sacrifice. Many people think that there’s no room for saving in their budget, but small sacrifices often lead to big savings.
The best thing you can do is write down your incomings and outgoings and figure out what you have left. Cutting down on things like takeaways, eating out, or buying treats you may not need can help you save a significant amount.
Something as small as making your morning coffee instead of buying it can help you save a lot over a year. You could also consider stopping TV subscriptions or gym memberships.
2. Another Job
For many people, getting an additional job doesn’t sound like an appealing option. No one wants to be working all hours of the day to the detriment of their physical and mental health.
However, there are plenty of jobs out there that have an enormous amount of flexibility. You can decide when you want to work, where you want to work, and bank everything you earn to reach your goal quicker.
For example, if you get home after a day at your full-time job and have no plans and the energy to do more, it’s a great opportunity to earn some more money.
Jobs like customer service, administration, writing, graphic design and many more can be done remotely. Additionally, if you have experience and qualifications, you can get paid handsomely for the work you do.
3. Living in the Suburbs
City homes are in high demand and you’ll often need to put a substantial initial payment down to afford a small amount of space. When you widen your searches to the suburbs, you’ll undoubtedly find more value for money.
Similarly, if you’re looking for a home where you can expand your family, you’ll need to think about the amount of space in the home you buy. You’ll need to have extra room so that the house still works for you when your family grows.
Although these homes exist in cities, they’re far easier to buy as a first-time buyer or far more affordable in suburban or rural areas.
4. Take Care of Your Credit Score
Your credit score is important when it comes to purchasing a home. Although it won’t help you save money towards your goal, it can help you get the best loan rates. If you have a high credit score, you could get lower rates of interest which means you’ll be paying the lowest amount back in the long run.
If you apply for a loan with a lower credit score, you may only be offered higher interest rates. This means your monthly repayments will be higher. If you’re not doing it already, you should consider doing all you can to get your credit score higher.
What are loans for mortgages? A mortgage loan is something you apply for to cover the cost of your home and your credit score will dictate the types of mortgages you’re eligible for. You can boost your score by paying your bills on time, lowering your debt, and correcting any mistakes in your report.
5. Use Your IRA
Although it shouldn’t be your first choice, you can take a sum of money out of your IRA to use as a deposit on your first home. If you’re having real difficulty saving the amount you need to pay for a house and renting won’t allow you out of that vicious circle, your IRA could help.
The IRS allows first-time buyers to withdraw up to $10,000 without a penalty. However, that does mean that you’ll be $10,000 down when it comes to your retirement. If you do make the decision to use your IRA, it’s important to start putting away money to replace the amount you took.
As a homeowner, you’ll get some savings on tax, so you could consider putting those savings into your retirement pot so you don’t miss out when you’re ready to retire.
6. Realign Your Expectations
You might have an idea of what your perfect home would be but that won’t necessarily be your first home. Often, your first home is just a stepping stone to bigger and better things. So, it’s important to manage your expectations.
It’s a great idea to speak to a financial advisor and get a realistic view of what you can afford. When you know what you can afford, you can explore the type of properties in your price range and set goals accordingly.
Affording a Home: Putting the Work In
Like any dream worth reaching, affording a home requires a lot of hard work and sacrifice. If you’re thinking about how to afford a home in your current circumstances, look at all your options.
Depending on when you want to buy, you may have more or less time to work on saving the amount you need. The good news is, there’s an option that will fit every time scale.
Was this article helpful to you? Take a look through more of our articles for tips on managing your finance.