Looking for information on how to save for your first home? As someone who’s purchased one home, and currently in the process of buying another, I’ll provide practical tips to help you reach this goal. It’s a tough economy, and if you don’t have a lot of extra income, saving for a down payment is challenging. Don’t let this discourage you. Here are some of the best tips on how to save for your first home.
1 Pay Yourself First
If you need information on how to save for your first home, here’s an important piece of advice: pay yourself first. Before you give money to your landlord, your auto lender or MasterCard, deposit a percentage of your income into a savings account. This is challenging at first, but once you get into a routine, it’ll become second nature. Aim for 10% of your earnings, but go lower if this is a stretch.
2 Contribute to Your 401(k)
Do you have the option of contributing to an employer-sponsored retirement plan? Take advantage of this and you’ll not only plan for retirement, but build a cash savings that you can use for a down payment. Of course, you’ll have to repay funds that you borrow against your retirement account, plus pay a withdrawal penalty. But if you need an extra $2,000 or $3,000 for your first home, this money is available.
3 Sell Personal Belongings
If you have a second car, a boat, a motorcycle or any other vehicle that you barely use, sell this vehicle and put the proceeds in savings. Even if you don’t profit enough to cover your entire down payment, the proceeds can jump start your efforts. Consider other things that you can sell. These might include gold jewelry, your old wedding gown, electronics and furniture.
4 Keep Tax Returns
Free money from the government is an excuse to shop and spoil yourself. But if you want to purchase your first house, adjust your priorities. Save your tax return for two or three years and you might have enough for a down payment. Use a professional tax preparer to make sure that you take advantage of every possible deduction. This maximizes your return.
5 Look for New Employment
In reality, your present income may not afford the opportunity to save for a down payment. If your salary only covers your current expenses, look for new employment. Make adjustments to your resume to highlight new skills, such as a class or workshop. After finding new employment, deposit extra earnings into savings.
6 Work Part-Time
Maybe you like your full-time job and don’t want to quit. This is okay. But if you need extra cash, consider part-time work to generate additional income. You can find work during the evening or on the weekends. Another approach: talk to your boss about overtime or start your own side business.
7 Make Sacrifices
Sometimes, saving cash for a down payment only involves a few sacrifices. For example, you might skip your annual vacation and put this cash in savings. You can also cut back on everyday expenses. Brown bag your lunch, avoid frivolous shopping and stop trying to keep up with your friends.
Typically, mortgage lenders require 5% down on conventional mortgages - approximately $5,000 for a house with a $100,000 price tag. Don’t let this number scare you. Develop a savings plan, start small, and you’ll eventually meet your goal. How did you save for your first house?
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