Looking to buy your first home? There are dozens of creative ways newlyweds and other first time buyers may need to cut back on daily costs and unexpected expenses. But don’t get caught off guard or feel daunted by the task of saving for a home down payment. Here are a few easily manageable options for saving.
- Raise your credit score. – Part of your home loan interest rate will be determined by your credit score. Lower scores mean higher interest rates. Know your credit score and pay off any outstanding debts or contact creditors to remove any outdated items that may be tarnishing your good name. Clean credit is the #1 thing you’ll want to have before you even start saving.
- Don’t be late! – The second part of #1, paying bills on time is a simple and responsible step you can take to keep your credit score clean.
- Get pre-approved. – Visit with your local banker to get a pre-approval quote. They can analyze your finances with you and determine what size of a loan you may be able to receive. This will also help you determine how much you will need to come up with for your down payment and that will help you with the next step…
- Setting your budget. – Use your pre-approval amount as a baseline. It will also benefit you to investigate available loan programs and then sit down with your banker again to outline your budget, including cutting all possible expenses.
- Understand what owning vs. renting means. – One of the benefits of renting is that when the pipes burst or the water-heater dies, the landlord is responsible for repairs. First time homeowners can often underestimate all the additional expenses they will need to prepare to cover. Don’t under-budget for the unexpected. Make sure your budget includes a savings account devoted just to extras and repairs, so you don’t risk falling into a financial hole right after you move in. Getting into a “save, save, save” mindset early on will only offer extra comfort and preparedness when the time comes to buy.
Combine and practice all these strategies and you’ll be well on your way filling your down payment piggy bank.