Buying a home, even if you are going to get a mortgage, requires a little bit of cash. The more cash you have on hand that you can put down for that home, the less you are going to have to pay for the home over the years of the mortgage. You can even get your interest rate knocked down a few percentage points by placing a larger down payment. If you want to start saving to buy a house, here are a few tips to get you started:
Rein in your spending. Spending money is fun. It costs money to go to the movies, to buy some cool new clothes, to eat some tasty food, etc. Cutting down on your monthly spending and putting all of that excess money into a savings account can put your leaps and bounds ahead of someone who continues with their spending habits and still wants to buy a house.
Decide how large of a down payment you want to make. 20% of the house’s total price is a worthy goal, but even just 10% can make a big difference. Deciding how much you want to put down gives you a good goal to work towards while you’re saving money. As you are standing in a store, considering whether or not you really want that $50 shirt, having that goal in your head will remind you that you are trying to save money for something big and substantial.
Pay down your debts. This might sound like it is taking money away from your home fund, but in reality, having a lower debt to credit ratio will make you more attractive to lenders. If you can get rid of some of your other debts (student loan, credit cards, car payments) before you buy a home, you’ll have more money to actually pay for that home when the time comes.
Make a commitment to save more each month. If you don’t already have a line in your budget for your savings account, it’s time to add one (or make a budget if you don’t have one yet). Then, make a commitment to put at least a hundred dollars into this savings account each month, specifically for buying your home. Most people can manage to scrounge a hundred dollars!