Even if you feel like becoming a homeowner is a few years away, the sooner you start to save for this huge life event, the less pressure you will feel when you finally do decide to take the plunge. There is a lot financially that goes into owning a home, and creating a savings dedicated exclusively to this goal is a smart approach, this way you are not scrambling to rearrange your budget when you start your search and realize what it will take financially to get those keys in your hands.
Look at Your Existing Finances
Go over your current budget, your debt-to-income ratio, and you where your tracked expenses are going each month. You may be able to uncover a way to save for your first home without having to make any significant sacrifices. Options like debt consolidation and refinancing student loans are great ways to create excess cash month to month that you can seamlessly allocate towards your house fund.
You can use a guide on how to refinance your existing private or federal student loans into a new loan with a private lender to save money off your monthly expenses. In this scenario your credit score is going to play a large role. Since interest rates are often changing the chances that there are more favorable ones available now as opposed to when you signed for your loan are high. If your credit history has improved, then lenders will view you as a more trustworthy and attractive candidate and your new interest rate will reflect that perception.
A benefit of making the decision to save for a home before making the decision to begin the buying process is time. Time to determine your goals, your plan, and your expectations. A great way to practice this perk, is to set up an automated savings plan. As you review your budget, pay attention to areas where you can cut back and total out those trimmed down dollars. Then make it a habit and a personal discipline to automatically put those funds aside monthly before they have time to come into the picture of money you can otherwise spend.
If you are looking to level up, automate the process. Having a predetermined amount of money funneled out of your paycheck into a specific account automatically will not only take the guesswork out of the process, but it also eliminates the temptation to sway off course. Getting into the practice of banking your windfalls is another smart out of sight out of mind way to save for your first home. Any income that comes your way that is not earned from your main income can classify as a windfall. Bonuses, birthday money, or income tax refund checks are all good examples of windfalls that can be automatically added towards your home ownership nest egg without making any sort of impact on your daily budget.
Understand that just as the housing market can change in unpredictable ways, so must you. While you are saving up money it is inevitable that other demands on your finances will emerge. None of these emergent hiccups will magically stop simply because you have decided to save for a house. Being able to exercise flexibility in your savings plan and give yourself some grace while exercising that flexibility will prepare you for the rollercoaster that you can expect when your homeowner experience officially commences.