The idea of putting money away for a house can be stressful. How are you supposed to do this while keeping up with everyday expenses? The good news is that you can save for a home with a little more financial discipline and several lifestyle changes.
Here are a few things to consider when starting your journey.
Adjust your budget
It’s impossible to save funds for any large purchase without first creating a budget. Determine where your money is going every month and how you might reduce your spending. Perhaps implementing some cost-cutting measures here and there will lead to hundreds of dollars in monthly savings.
For example, let’s say you take a long look at how much money you give yourself to buy groceries. Does it seem like a lot for your household? Then it may be time to buy generic, use coupons, and skip the junk food for a while.
Eliminate unnecessary purchases
Establishing a budget and forgoing unnecessary purchases go hand in hand. So review your bank statements from the last month when you get a chance. Are you stopping for coffee or dining out a little more than you should?
Now, don’t think you can’t have fun until you have the money for a house. Financial experts recommend earmarking a category in your budget for things such as date night or a hobby. Just avoid exceeding the amount or giving yourself too much cushion in the first place.
Pause your retirement contributions
IRA and 401(k) funds play a critical role in your post-working years. However, it would be wise to temporarily pause these contributions and build up your home savings account using the extra money. This move can be particularly helpful if a high percentage of your income goes toward retirement.
Land a second job
You work hard to put food on the table and a roof over your head. But to truly stay ahead of your homebuying aspirations, you might have to pick up a second job. The gig can be something you do at night, on weekends, or both.
Remember that you decide how to earn this extra income. While some folks opt for delivering food or dog walking, others take on a passion project. This could be your opportunity to assist someone with your area of expertise and receive compensation for doing so.
Save tax refunds and other windfalls
Have you ever thought about how you would handle an unexpected windfall? Yes, it’s tempting to immediately blow your tax refund or inheritance on a luxury car. Alternatively, how much progress could you make with your house fund if you added this money to it?
There are also ways to enjoy the best of both worlds. If you know that a $3,000 refund is on the way from Uncle Sam, put $2,500 toward your home purchase and the remaining $500 toward a cheaper but reliable vehicle.
Ask for a promotion
Nobody wants to have a salary conversation at their job. That said, if you’ve been excelling in your current position over an extended period, you likely have a good case for a raise. And if you can reach an agreement with your manager, be sure to transfer the extra funds from your paycheck to your house fund.
There are right and wrong times to have this conversation. That’s why we advise discussing a pay increase at your annual review. In the meantime, continue fulfilling your responsibilities and gathering performance information to demonstrate your value to the company.
Pay down high-interest debt
Debt will singlehandedly ruin your homebuying prospects. Not only does high-interest debt prevent you from maximizing your savings and house fund, but it lowers your credit score as well. It’s worth noting that lenders scrutinize credit score over most other factors when looking at a borrower’s financial profile.
Our advice? Pay off outstanding debt rather than try to build a huge down payment fund. You may qualify for down payment assistance, but only if your credit score is up to par.
Use gift money
Unfortunately, you can put all of these tips into practice and still fall short of your savings goal for a house. A down payment gift allows you to use funds from a loved one to secure a down payment. The only thing is that you will need to familiarize yourself with the down payment gift rules and what lenders expect based on a borrower’s loan program.
Ready to learn about down payment assistance and loan options specific to your situation? Call an Andre Company mortgage consultant at (949) 478-5226.