How to Save for a Home

Have you been dreaming of owning your own home or even upgrading the one you currently have? With a few simple steps and a little saving, you could be well on your way to move-in day. If home ownership is on your to-do list, follow these simple steps to save throughout this next year.

Track spending and make a budget
Prior to even looking at homes, decide what amount you can comfortably afford. The beginning of the year is a good time to not only track all your monthly spendings and create a budget of your expenses but to look at your spending habits from the previous year. Once you’ve looked at all your expenses, you’ll have a more complete picture of how much money you truly have at the end of the month and what you can do to increase your savings.

When you go to get pre-approved, keep in mind what the bank may say you can afford might be drastically different from what you can actually afford and maintain the lifestyle you want. Calculate your total home costs, including mortgage, property taxes, and home insurance, which can often add several hundred dollars to your total mortgage.

Save for a down payment
Having a low debt to income ratio will be beneficial when saving for a down-payment and getting a mortgage.  Your savings are another aspect of your financial picture that lenders will be very interested in. But you don’t only want to build up your savings to impress lenders. You’ll want to save money for a down payment on your new home. It’s also important to note that you will need to have cash on hand for closing costs AND any inspections that you choose to get during the term of your due diligence.

Finally, nearly every homeowner would agree that you will want to have money saved up for things like home décor, maintenance, and renovations. Start saving early to put yourself in the best position possible to afford the home you want—and the things you want to put in it!

Improve your credit score

Your credit score is a significant factor that lenders use to determine your eligibility to buy a home. The better your credit score, the better your chances will be to secure a home loan. Some ways to improve your credit score are to pay off any credit card bills, refinance student loans and refrain from opening any new accounts.

With these few simple steps, you will be well on your way to the closing table.