Millions of new home buyers face the same challenge every year: how to save enough money to make a down payment on a first home. The devil is in the details, according to popular a saying, but there’s really no mystery to accumulating enough cash to get the home you want. Many first-time buyers don’t realize that there’s even more to the new house game than a down payment. Closing costs and other assorted fees can be almost equal to what you are required to fork over in a down payment.
Here’s what financial advisors say are some of the best ways to get off square one and build up enough cash to acquire the keys to your first home:
Check Your Credit
Checking your credit scores won’t put money in your bank, but it can be a first step to improving your creditworthiness and thus needing much less for a down payment. If you find any errors in our reports, contact the agency immediately. Also, if your scores are not where you want them to be, consider paying credit cards down as much as possible. That’s the fastest way to bump your credit up and can make a huge difference in the final deal you make. Good credit has sort of a chain-reaction effect on the home purchase process.
Better scores can mean a lower interest rate. Lenders are also willing to demand less down when they’re dealing with buyers who have solid scores. Never underestimate the value of paying down your card debt as a way to make life easier during the purchase process.
Re-adjust Your Monthly Budget
Check for leaks in your budget that might allow for a larger percentage of savings each month. Consider cutting down a bit on entertainment and discretionary spending while saving for the big purchase. Simply upping your savings rate from seven to 12 percent can make a major dent in your down-payment fund.
Refinance Your Student Loans
One of the most effective ways to ramp up your savings is to refinance student loans. For starters, you’ll likely get a better interest rate because you’re older and more financially stable than when you got the loan. Second, most lenders will give you the opportunity for a longer payback period which will allow you to free up much needed cash. The money you save each month can go directly into your special house fund. This one approach has the potential to help you get your entire down payment funded in just a year or two.
Get a Part-Time Job
It used to be more common than it is now, but getting a part-time job for the sole purpose of pumping up a bankroll for a home purchase is a solid, realistic strategy that has worked for millions of prospective home buyers. You need not take on a 20-hour load, so consider adding 10 or 15 hours of extra work per week for a year. It’s surprising what you can save toward a home purchase by sacrificing your free time for 12 months. You’ll appreciate the house more and will almost certainly enjoy a newfound feeling of freedom and financial strength.