Tips for Saving for Your First Home

Tips for Saving for Your First Home

March 17, 2021

Buying a new house can be really tough, especially for those doing it for the first time. But while trying to buy a new home, first-time buyers can meet some advantages that the country created to encourage young people not to put their dreams on hold, as buying a home is considered one of the American dream’s key factors. Thus, let’s discuss what you should consider before purchasing a new home, plus tips to make your dream come true with fewer efforts. 

Who Are Considered First-time Homebuyers? 

Anyone who has not owned a home for the last three years, or previously owned a home with someone else, is classified as a first-time homebuyer. If you have owned a house, but your spouse has not, you can buy a house together as first-time home buyers. The U.S. Department of Housing and Urban Development declares that first-time homebuyers can get help from state programs, tax breaks, and federally backed loans. Depending on which state you live in, you may have access to different programs to help you purchase a home. Tax breaks reduce the amount of tax or change the tax system to benefit the customers. The Federal Housing Administration (FHA) manages the federally backed loans program and offers several homeownership programs, including mortgage insurance and homeownership vouchers for low-income families. 

What is a Down Payment?

For purchasing a new house, the buyer should make a down payment. A down payment is a type of payment made in the early stage of a purchase. The amount is a percentage of the purchase price. Sometimes, the down payment is not refundable even if the deal falls because of the buyer. In most cases, the buyer makes financial arrangements to cover the remaining balance. 

Tips and Tricks for Building a Habit of Saving

The first thing you should do before purchasing a house is to get prepared for both the purchase and the ongoing expenses. Don’t even start thinking about buying a home without having an emergency fund with three to six months of living expenses. Buying a home will include upfront costs such as the down payment and closing costs. You need money to put away not only for those costs but also for your savings.

Budgeting. The first step in the saving process is budgeting. Knowing exactly how much and what you are spending on every month is crucial. This estimation will help you determine how much you can provide for a loan payment. A budgeting app can help you automate the process if you avoid calculating your expenses yourself.

Cutting expenses. After budgeting, see where you can cut back your costs. Reducing or entirely cutting the habit of spending helps to put away hundreds of dollars. 

Save “Extra” money. Putting every extra dollar and gifted funds towards your down payment is another important step to build your savings. It may seem too small to make a difference, but every little bit helps. This will allow you to acquire a habit of saving that will serve you all your life.

Automate your savings. For automating your savings, first, decide how much you want to save per month. Contact your bank and authorize an automatic withdrawal from your account into a separate savings account. This is very useful if you have trouble managing your money.

What Should Be Taken into Account Before Launching a Purchase Process

Credit scores are important. To qualify for a home loan, you need a good credit history of paying your bills on time and a maximum debt-to-income ratio of 43%. Thus, you should check your credit history and try to improve it before making a purchase.

Pre-approval can be crucial. It is important to know how much a lender will provide you to buy your first home. The lender will offer a sum of money based on different factors like how much other debt you have, your monthly income, and how long you have been at your current job. Make sure to get preapproved for a loan before placing an offer on a home. In many cases, sellers will not review your claim if a mortgage preapproval does not accompany it. Preapproval is necessary for completing the paperwork.

A Good Real Estate Agent is Crucial. Once you are preapproved for a mortgage, you should look for a good real estate agent who should match your needs. The agent should make recommendations and introduce the market to you so that you can find a home that suits you best. He should also guide you through the paperwork and the process to successfully get approved to buy a home.                    

Bottom Line!

Saving for the first house can be a challenging experience. It can seem time-consuming, stressful, and exhausting. But the tips mentioned above can speed up the time it takes to build savings for your first home.