Buying your first home and taking out a mortgage is a major milestone in your life. It can be an exciting time, but it can also be overwhelming because of the cost and all the financial decisions involved. Being able to afford a condo or house may seem unattainable, but with the right financial planning and budgeting, you’ll see it isn’t that out of reach.
Of course, unless you’re paying for your entire home yourself, which is highly unlikely for the majority of people, the time will come when you need to take out a mortgage. For some, buying a home is your first major purchase, and you may not have a good credit history or credit score to take out a mortgage. Starter loans are one option and can be a way to rebuild your credit history, or establish one, as they prove to the borrower that you are diligent and will repay the loan.
Until you have to cross that bridge, however, there are a few ways you can cushion the financial burden of home ownership by properly saving and budgeting for a down payment on a home, as well as prepare yourself for any upcoming mortgage payments. Here are the best ways to budget and save up for the purchase of your first home.
1. Put money aside
Take a look at your expenses and finances coming in for the month, and see what you can afford to put away in a separate savings account. Even if you just start small, it’s better than nothing, and eventually you can work your way up to a higher number each month. Or, whenever you have extra cash available, deposit that as well. The important aspect to remember is to be consistent, and start early. This is a long-term budgeting solution, and even small savings can grow with enough time.
2. Make a plan
Decide on a budget and figure out exactly how much you will need to save, keeping in mind your housing expenses shouldn’t exceed 30 percent of your monthly income. Consider you should put down a down payment of at least 20 percent in order to get the best deals on a mortgage, and then do your best to calculate what dollar amount you’ll need in order to buy a house based on your financial circumstances. Also, it’s helpful to figure out a timeline so you can hold yourself accountable and make sure you’re on track. Without a plan or a budget, you could end up purchasing a home you can’t afford and getting yourself into a sticky situation.
3. Consult a financial planner
If finances and money isn’t your strong suit, don’t sweat it. You can enlist the help of a financial planner, who can sit down with you and go through your finances and your goals to help you come up with a tangible and realistic savings plan.
4. Get another source of income
Still coming up short based on your plan? The housing market can be expensive and tough to navigate, so maybe it’s in your best interest to get a secondary source of income. If you have a full-time job already, consider a second, part-time or work-from-home job to get a bit of extra cash to add to your savings. You can find remote jobs online, or find a way to monetize a skill or craft you already have as a side hustle. Just remember, mortgage payments will become a reality once you’ve bought your home, so make sure your financial situation is stable enough to account for monthly bills as well, and not just a short-term, one-time purchase.