If you want to stop paying rent and find a house that’s truly yours, you will need a down payment. The more cash you have on the day you sign your mortgage, the easier your first years of home ownership will be. Learning the habit of saving every month is a habit that can help you through many phases of life, including home ownership.
Determine How Much You Need to Save
Depending on where you buy and how much work you’re willing to do, you can actually get into your home with very little down. However, even if you can get into a program that requires little money down, you will need some money in the bank for repairs and emergencies. Be aware that until you pay down to 78% of the purchase price, you will be required to pay private mortgage insurance (PMI), which can run between 0.03%-1.5% of your mortgage every month. According to Craig Bosse, some mortgage programs allow you to only put a 5%-10% down payment together in order to purchase a home. Once you have that down payment and are able to budget for PMI, it’s time to get pre-approved.
Start Saving
There are many budgeting apps and tools to help you save money. However, one of the simplest ways to save is to return to cash. If you need to go to the grocery store, review the sale ads, determine what you need, and take that amount of cash to the store. This is a great way to cut down on impulse purchases and a great way to limit spending overall; when you’re out of money, you’re done spending. The Everygirl recommends determining how much you need to save and by when, then breaking that down by paycheck and putting that money away first.
Borrow from Yourself
If you have a 401(k) retirement account from your job, you can borrow your down payment from yourself. This process may mean making two loan payments for a time while you pay off your 401(k) loan and pay your mortgage, but this is a great option to buy a home more quickly than by saving post-tax dollars. According to Ovation Property Management, renting is a great option if you’re not sure what area of the country you want to live in long-term or are just getting started in your career. However, if you know where you want to live and are happy in your job, it’s a good idea to start paying your own mortgage.
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