How To Save For Your First Home
A house could be the biggest acquisition you could make (unless you're interested in real estate of course). Oftentimes, many underestimate the costs of securing a house, particularly when it is their first. Across the internet, you'll find thousands of articles on this very topic but out of all of the advice out there, there are four steps to save for your first home that most would agree are the best way to go about it.
1. Draft Your Budget
It is commonplace to come across the promise that your monthly payment (upon the mortgage purchase) would be lower than the rent you're currently paying. Alright, that could be true, but there are a lot of carefully veiled expenses to be incurred during the process, and what's more, owning a home comes with additional costs.
Upon the purchase of a house, you'll have to pay a loan origination fee, estate agent's fee (if applicable), insurance fees and closing costs. This could take an astronomical rise when you consider the extra furnishings you might have to come up with.
Consider using percentages to draft your budget. Your entire monthly payment would be healthy to stay below 28% of your gross earnings monthly.
2. Decide The Home That Suits Your Needs
Single-family home: This is, of course, the cheapest home you can buy. A single-family home will just be ideal for you and your family, especially if you're not big on vast spaces. However, this home type comes with a long list of additional expenses.
Multi-family home: Perhaps you have an eye for investments or are going to live with a friend's family––then this would be the ideal choice for you. Your family could live in any of the units while you rent out the other units––provided you have the cash to acquire a multi-family home. Through rents, you can earn passive income that could cover the entire cost of your mortgage payments. Bingo.
3. Determine Down Payment
What percentage are you going to put down? Typically, you'll see people putting at least 20% down. With this rate, you're likelier to be approved for a mortgage at a lower interest rate as well as enjoy a lower monthly payment. Anything lower would increase your long-term expenses.
There are special packages exclusively for first-time homebuyers. Some of these programs could allow you to make a lower down payment while some could even grant you a mortgage with no down payment at all. The Federal Housing Administration (FHA) offers a very common low down payment program.
4. Earn More, Save More
Having had a budget, decided on what you want, and settled your down payment, it is necessary to earn more and save more. Simple logic, we suppose, but how?
You may need to change your job or obtain a pay raise if your budget requires you to. Sometimes even a job change is necessary (purely for the financial improvements). Or you could secure a side hustle to earn more.
To save, cut down on surplus expenses (such as transportation fees and excess entertainment); live on one income if possible.
Overall, owning your first home is not as difficult as it appears, provided you're properly prepared. For more information, you can always reach out on how to save for your first home.