No matter your age, homeownership is a goal for many of us.
Realistically, many of us don’t have the means to buy a home in cash, which leaves most homeowners resorting to a mortgage loan tailored to their needs.
The general rule of thumb used to be that before the keys were handed over, 20 percent of the home’s value had to be put down. That’s not necessarily the case anymore. Now, depending on your financial situation, you may be able to secure a home loan with little to nothing down.
If you do opt for less than 20 percent down, you’ll likely need to factor in private mortgage insurance, better known as PMI. This coverage protects the lender if you default on a mortgage payment. Coverage can range anywhere from 0.5 to 2 percent of your home’s value on an annual basis. Once your principal loan amount is less than 80 percent, you’ll likely be able to drop PMI coverage.
Though you may not need to put down a significant chunk of cash, it’s still a wise idea to stow away some money for a down payment. Below are some tips to help you save for what’s likely the largest purchase of your life.
Open A Savings Account
It doesn’t get much simpler than this. If you don’t already have a savings account, consider getting in touch with your financial institution to see what your options are. Most times, you’re able to connect a savings account with your checking account, making for easy transfers between the two. Also consider doing some research when it comes to receiving the best interest rate. If your money is just going to sit for a while, why not let it grow at the same time?
Cut Back
Do you have a subscription you rarely use? Or maybe you like to indulge in retail therapy (a bit too often). Sit down and take a minute to go through your finances to see where you can cut back. You’d be amazed at how quickly you can cut costs by evaluating your wants and your needs. Also, this is a great time to review and negotiate interest rates with loans, credit cards, vehicles, etc. Sometimes all it takes is one simple call to bring down your interest rates. Depending on how much of a balance you carry, this could save you a decent chunk of change.
Pick Up An Extra Job
It’s understandable that this is not practical for everyone, but if you have the time and a strong work ethic, it can be a great way to pick up some extra cash. This can be as simple as walking dogs, doing yardwork or shoveling, driving for rideshare service, or using one of your talents to freelance. Some people highly value a work-life balance, and there’s no need to give that up. But if you find yourself bored, why not make some extra cash on the side, putting you one step closer to homeownership?
Ask For Help
Don’t feel ashamed in doing so. Saving for a home is a serious commitment and is by no means easy. Instead of receiving tangible gifts during birthdays and holidays, instead opt for cash. It may seem uncomfortable, but your loved ones will likely understand and support your efforts in becoming a homeowner.