Negosentro | 5 Ways You Can Start Saving For Your Dream Home Right Now | Saving enough money to purchase your dream home can seem daunting or even impossible. However, saving is within your reach if you create a financial plan. Here are five ways to reach your goal of owning your ideal home.
1. Calculate What You Can Afford
Before you can begin your home savings plan, you need to know how much you can afford. A general rule is to keep your monthly mortgage payments at or below 25% of your monthly income. You will need to factor in your loan principal, taxes, interest, insurance and associated HOA fees.
You can find mortgage calculators online to help you determine what mortgage payment you can afford. Once you’ve selected that amount, you can start thinking about the size, location and features you want. Do you prefer living in town? Are you looking for a home with a basement? Do you have plans to search for pool builders near me so that you can have a pool installed? Having a mental picture of your dream home can help motivate you to save.
2. Create Your Budget
You need to know where your money goes each month before you can determine how much you’re able to save. If you don’t have a budget, start by looking at your credit card and bank statements. Observe how much you spend on essentials such as food, rent and utilities. Also, take note of nonessential expenses such as entertainment.
Once you’ve calculated your monthly expenses, see how much money you have left over. Set aside a fixed minimum amount to save each month. Consider having the funds withdrawn from your paycheck automatically so that you don’t forget or make excuses not to save it.
3. Reduce Expenses
To achieve your goal faster, consider reducing your expenses anywhere you can. Moving into a smaller apartment or selling a vehicle are significant steps toward saving more. You can also contact your insurance agent to see if you qualify for discounts. Higher deductibles can also reduce insurance payments.
If you have an unhealthy habit, consider letting go of it and allocating the money you save toward your dream home. If you smoke, for example, or have a shopping habit, cutting out or reducing these expenses frees up more money for you. Try reducing your food bills by purchasing store brands when possible, looking for sales, using rewards programs and cooking at home as much as you can. You can cut your utility bills by adjusting your thermostat a few degrees, washing clothes in cold water and hanging them to dry.
4. Increase Income
There are a few approaches you can take to increase your income. One strategy is to ask your employer for a raise. Make sure the timing is right; don’t catch your boss off-guard or on a busy day. A good time to have a conversation is after completing an important project. Be confident and enthusiastic when you talk to your boss, but don’t go in expecting or demanding more money.
You can also explore other jobs to see what else is out there. Perhaps you can find work in your field that pays more than what you currently earn. If you find your salary is below the average in your area and you’re not ready to leave your current job, think about talking with your employer about your findings.
5. Pay Down Debt
While you want to maximize your savings, it’s also advisable to use the extra income to pay down your current debt. Lenders view your debt-to-income ratio when considering a loan request. The lower your ratio, the more favorable your loan terms can be. Create a plan to pay down as much debt as possible before you apply for a mortgage loan.
The Bottom Line
Buying your dream home is a worthwhile and exciting goal. The more you can stick to your budget and savings plan, the sooner you can achieve your dream of homeownership.