Most people who live in a rented home or apartment will readily buy a home of their own if their financial situation permits, because a home is a sound investment. If you have been struggling to save enough money to purchase a home, you will find the following 6 tips helpful:
Be a responsible spender
If you are planning to buy a property, you need to improve your spending habits. You should create a realistic budget and then stick to it. Rein in unnecessary expenses. Many people who earn good salaries don’t have any savings because they spend as much as they earn. Don’t make that mistake. Buy only those things that you really need. Limit the use of your credit cards and spend less money on entertainment and shopping.
Assess your borrowing limits
Consult a financial advisor to have an honest evaluation of your borrowing capacity. Do you earn enough to make regular mortgage payments without having to compromise on your lifestyle or basic needs? A financial advisor can help you decide. By evaluating your current income and expenses, they will also be able to suggest ways to cut corners and save more money.
Get a pre-approved home loan
Have a meeting with your lender to discuss the possibility of getting a home loan pre-approved. This is something you need to do before you start searching for homes. A pre-approved home loan will specify your borrowing limits. If you have one, you can start looking for homes, knowing well that you will be able to close the deal if you find the property of your dreams.
Pay off your existing debts
You might have some outstanding debts. If so, try to pay them off before applying for a home loan. This improves your credit score which plays a significant role in determining your eligibility and borrowing limits.
Personal and credit card loans usually have high interest rates. By paying off these loans, you will be able to save more money each month. You can use these savings for making your down payment.
Create a budget
Nobody knows your financial situation better than you do. The bank may give you a home loan after analyzing your credit score and monthly income. However, you may have several expenses that the bank is not aware of. So prepare a realistic budget. Home ownership comes with several responsibilities and expenses. For example, home owners need to pay municipal taxes and utility bills etc. In addition, the home will require periodic maintenance. All of these cost money. Make sure that your income is sufficient to take care of these expenses. Otherwise, your homeownership will land you in a financial mess.
Save, save, save
You need to make a down payment. Many lenders insist that the buyer contributes 15% of the sale price of the home. This wouldn’t be possible if you don’t have enough savings. If you can make a larger down payment, you will be able to save thousands of dollars on interest payment.
What’s more, borrowers who contribute less than 20 percent of the purchase price of the home will have to buy mortgage insurance which can cost hundreds of dollars each month.