Buying a home is exciting no matter if you are a first-time buyer or a seasoned homeowner. Either way, one of the first steps in the process is going to be an assessment of your finances. Before you look to lenders to present approval amounts you will want to have money saved up to allocate towards a down payment on the loan.
Down payments vary in size based off not just the total amount on the mortgage but also the preference of the purchaser and offering a big down payment can save you a lot of money in the long run.
Saving for a down payment differs in style from other large savings goals like retirement for example because unlike retirement, these funds will need to be accessed earlier than the funds for retirement would be. This means slowly setting aside small amounts of money is not the most efficient path towards achieving your goal.
Get your existing debts and their associated payments under control before you set your plans in motion to take on another one, like your mortgage. Student debt is among the most common drain on finances, and for good reason. Loan amounts for your education are large, and the interest rates can be extremely high.
Use your current standing with your lender as leverage for a possible refinance. You can refinance your existing student loans with a private lender in order to save money on your monthly expenses. If you have a good history of on time payments, and paying the required amount monthly, then you will likely be a good candidate for refi through a private lender.
Lowering your monthly payment creates room in your budget to reassign that cash towards saving for your down payment. This strategy can be seamless and requires little to no adjustments on your end but can result in a significant bump towards your down payment goals.
Credit card debt can also hinder your ability to build up funds for a down payment, and ultimately also affect the approval process when applying for a mortgage. Also think about using the found money from refinancing existing student debt with a private lender to pay off credit cards with high interest rates. The less places you own money to, the easier it will be to begin to save in a significant way without penalty or guilt.
Determine Your Timeframe
Simply announcing that you are saving for a house is a great place to start, however, to really keep this goal at the forefront you should also assign a timeline for your plan. Additionally, initiate some conversations regarding the general timeline associated with home purchasing in your desired market.
Some areas dictate quicker decision making than others, and you will want to know this information upfront so that you do not get emotionally involved in the process prematurely. During this timeframe, be aggressive about saving. Hitting a goal is good but exceeding a goal does not hurt.
Windfalls, both planned for and unexpected, like professional bonuses, tax refunds, personal gifts, or even the selling of assets can all be allocated towards your down payment inside this predetermined savings window.