One of the biggest hurdles when buying a home is the lack of down payment. While it is now possible to buy a property with little to no down payment, there are still extra expenses to be paid, which is why saving is deemed much better.
Conventional loans, for instance, require a down payment to avoid PMI or private mortgage insurance. PMI protects the lender in case you default on the loan. FHA loans (insured by the Federal Housing Administration) require a down payment of at least 3.5%, which can be a great help for those with little savings, but there is still mortgage insurance to be paid.
Regardless of the amount you want to put down on a house, it is best to start saving now. You might also want to get in touch with a reliable lender or a credit union to know more about the loan process or get an idea of how much home you can afford.
First Class American Credit Union and other credit union service providers share a few ways on saving for your future house:
Create and stick to a monthly budget
You can quickly build your savings by spending less than what you earn. It makes sense to be honest and reasonable with your spending habits and avoid spending money on impulse purchases and non-essential items.
Cut out the biggest expenses
If you want to save fast and more, you want to cut out your largest expenses like your annual vacation. This may seem like a big sacrifice, but it can help you build up your savings quickly. You can also try saving a few bucks by skipping your morning coffee habit and choosing store-brand items instead of popular ones.
Have savings specifically for your housing goals
Create a dedicated savings account for your down payment and avoid making withdrawals in it. You can still have other savings or checking accounts that can help you with other expenses, but make sure that your dedicated savings are off-limits.
While spending less can help you save, it is much better to work more to have extra earnings. If possible, you can work overtime or get additional work. You may also consider taking a second work or a freelance job for a specific amount of time.
It is always better to be mentally and financially prepared when buying a home. Get help and additional tips from reliable lenders and credit unions.