There are plenty of practical tips for renters saving up to buy their first place. Home ownership is a wonderful goal but getting the keys to a new house can be costly. There’s a down payment and closing costs, and both items can cost as much as 5% of the purchase price. The financial pressures of buying a home are real, but here are seven tips for renters saving up for a house.
1. Don’t Jump into a New Car Payment
One of the best tips for renters is to not jump into a new car payment or any ongoing large monthly expense. Since you’ll need to save a hefty chunk of change to buy your first place, you need as much extra income as possible. If possible, delay any new car purchases until after you close on a home. The less you spend each month, the easier it'll be to save up.
2. Cash in Your Gold
Look in your jewelry box and you might have gold rings, bracelets, necklaces or watches that you no longer wear. Take these to a pawnshop or a gold buyer to see how much cash you can get. You may not generate enough to cover all your mortgage-related costs, but something is better than nothing.
3. Temporarily Downsize
If you're looking to buy a house to get more space, the thought of downsizing into something smaller —even on a temporary basis — may rub you the wrong way. But if you can reduce your monthly expenses, you can save up cash sooner rather than later. For example, you can go from a two-bedroom apartment to a one-bedroom apartment and save $300 a month. That's about $3600 a year for mortgage-related costs.
4. Get a Second Job
Sometimes, a full-time job doesn't provide enough income to save up for buying a house. Therefore, you might need to look for a second job in the evenings or on the weekends. If you can earn an extra $125 a week, that's $500 a month that can go towards buying a house.
5. Don’t Spend for a Year
You’ll have to buy food and other necessities but for one year, cut out frivolous spending. This involves cooking at home, learning how to entertain yourself and skipping your annual vacation. If you can survive a year-long financial fast, you'll be surprised at the amount of cash you can generate in a year.
6. Save Your Tax Refunds
I have a friend who was able to purchase her first place by saving her tax refund for multiple years. It took a lot of determination and self-control not spend this free money; but in the end, she was able to qualify for a home.
7. Maximize with Safe Investments
Putting your cash into a savings account is a good way to save up for buying a house. However, a regular savings accounts doesn’t offer a high yield. To grow your account faster, you’ll need to explore other options. Some people have been able to maximize their savings by opening a certificate of deposit, money market account or an online high-yield savings account.
Buying your first place is a wonderful feeling, but unless you get your finances in order and save enough cash, you'll never realize this dream. What are other tips for saving up for a house?