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Tips to Save for Your Starter Home

Tips to Save for Your Starter Home
by Alek Sabin

Making the jump from home renter to home buyer is a major step, but with a few lifestyle changes, saving up enough for a down payment on a home can come faster than you think. The key thing to remember when saving up for a home is that the lifestyle changes you make will only be temporary, and they will prove well worth your time and effort when it comes time to finally make that down payment. Here is a look at some simple ways that you can save for your starter home…

Cut Down on Your Rent

If you’re saving up to buy your first home, then rent is most likely your primary expense at the moment. It makes sense, then, to target rent first. If you’re a good tenant, you might be able to negotiate with your current landlord about paying slightly less for your rent every month. When this isn’t an option, be sure to take advantage of any referral specials that your landlord might have going on.

Beyond this, even if your living accommodations are well within your budget, you may want to consider temporarily relocating to something even more affordable, or taking in a renter; you’ll see the savings come much faster this way. The key thing to remember here is this: keeping your housing expenses below the recommended 33% mark every month might be working well for you now, but getting those expenses down to, say, 20% is what will really help you bring in that down payment money within the span of just a few years.

Create a Targeted Savings Account

Your efforts in saving up for a new home will go much further if you channel a portion of your earnings into a savings account designated for down payment savings. Opening up a special account for this purpose only will make your goal much more focused, and you’ll be much less likely to dip into savings on a whim. Moreover, this can serve as a place for you to set aside all unexpected sources of income, including tax returns, bonus checks, birthday money, garage sale earnings, etc.

Find Other Sources of Income

Consider putting in extra hours at your current job if you happen to get paid for overtime, and when that isn’t an option, consider taking up an extra part-time job. You could even start a small business on the side. Just be sure to channel all of this extra income into your down payment savings. It may offer some sacrifice in the short term, but making your goal of owning a home a reality will make your efforts well worth it.

Look for Items to Sell

You’d be surprised at what higher priced items you own but do not use frequently enough to justify keeping. Do you live near public transportation but still use your new car to commute to work every day? Consider selling your car, or trading it in for something cheaper to recuperate the difference. Do you want more and more TV on your computer these days? Maybe it’s time to sell your TV. From electronics to high-end kitchen appliances, you’re sure to find something that can add a significant chunk to your savings fund.

Cut Unnecessary Expenses

If you take a good, hard look at what you’re spending money on every month, you’ll likely find expenses that it no longer makes sense for you to keep up with now that you’re saving. Examples of such expenses include clothing, specialty coffee, gym memberships, online media streaming subscriptions, gas, and dining out often. You can also find creative ways to get lower energy costs by using smart thermostats, or even trying to improve the insulation in your home.

Ask for Lower Interest Rates

If you are consistent on your credit card payments, ask your credit card company for a lower rate. If you have had a credit card for a long time, companies pay off loyalty. Do your homework, learn what other competitors are offering so that you can negotiate with knowledge. Just call and ask. Be polite, but persistent. Make sure to pay off your credit cards on time to avoid paying excessive amounts of interest.

Have a Budget

If you do not already have a budget, make one. If you have one but you are not keeping it, be more consistent. Do not buy things that you have not accounted for in your budget. Be aware of what you are spending and cut back as much as possible (especially daily soda or coffee runs). Start using cash if you can. It will give you a visual of how much you have left and keep you from spending too much.

Find Homes You Can Get at a Deal

If you are willing to think outside the box, there are a lot of ways that you can get a starter home for a significantly lower cost. A major aspect of this is to look for homes that are unfinished, but good enough for you to start living in. A home with an unfinished basement provides a great opportunity for you and your family to move in, if the upstairs will fit you, and then you can finish the basement as your family continues to grow. Another thing to do is try to look past the curb appeal of a home. For example, specific colors on certain parts of a home will increase its value, but you can buy a home with less attractive colors and just repaint it later.

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