7 Practical Tips for Saving for your First Home

by Chris Lang on September 12, 2011

Saving For First Home

Buying your first home can be a wonderful experience, picking out the perfect place, moving in and feeling as if you can just put your feet up and relax and that you won’t be moving for a very long time is comforting.

Of course, there are some things you need to do before and to educate yourself about, before you get to the place of home-ownership. Having enough cash for that down payment, making sure your credit is good, finding out how much you can afford without strapping yourself to it, literally – and what area you think will be the best investment.

Saving:

It’s obvious that you are going to have to save money to pull together that down payment, which most times, even with first time buyers – is a requirement. A good down payment will also allow you to get your mortgage payment down to an amount you can afford.

Saving is difficult for most people, and in these times of economic hardship, even harder. But the end result is very rewarding so even though saving money can be a burden, it is a necessity if you are serious about buying your own home.

Budget:

Creating a budget for yourself can be a reality check and will help you to manage your money better. Many websites offer free budgets forms which can help you establish a solid savings plan.

Pay yourself first plan:

Most people are familiar with this term, and have come to realize that when you pay yourself first, from all household income, that you tend to stick to the savings plan. Especially when you have a goal in mind, such as a new home purchase.

When the paycheque(s) comes in, allocate a certain percentage to your savings account first. This way, as you pay the bills, whatever is left is spendable, and realizing you’ve already paid your savings account allows you more freedom for some of the fun things you like to do. If there isn’t much money left, there are tons of fun things to do that don’t cost a cent!

Mortgage:

First, remember that monthly mortgage payments are dependent on how much of a loan you get, what your monthly income is, and how much you can afford to put in as a down payment.

The down payment is critical to this equation because when you borrow hundreds of thousands of dollars, the payback is steep. Interest accrues and before you know it, your mortgage amount is a third, and sometimes more – than you borrowed.

Be sure that you shop for the best interest rate and when your loan is in process, secure that mortgage rate with your lender. They can lock-in interest rates so that if the rates escalate during the escrow or home search, you will be guaranteed that rate.

Credit:

When you set up automatic payments through your bill-pay, or credit card company, your credit rating can be affected in a positive way. Never missing a payment or being charged a late fee can increase your rating, and allow you much more freedom.

The pay yourself first plan can be established in your budget, as well as online. Paying all of your bills automatically, and on time, can benefit you in the long run, when buying that home.

Credit is the single most important factor in getting a loan at an excellent interest rate, which in turn, will keep your mortgage payment workable, and might even allow you a step up in the home you choose.

Work with a credit coach or credit advising company to get your rating up before you take that plunge into new home ownership. It will be well worth the time.

Savings accounts:

Another important factor in getting the funds together for that down payment are the components of your savings account. Are you getting a decent rate for the money you are saving?

Most standard savings accounts offer somewhere between .05 and 1 percent interest on these accounts, and sometimes less. These types of accounts are not where you want to put your hard earned money, because it could take years to accomplish your goal at those kinds of interest rates.

There are a lot of options, and depending on whether you plan on saving for a year, perhaps two or more– the options for Certificates of Deposit, Term Deposits, Mutual Funds, and many other options would increase your savings much quicker, and offer much better interest rates which in the long run, inspire you to stick to your plan. When you see your cash growing it gives you the incentive to continue!

Some options to look into may even be offered by your bank – however, looking into the options that best fit your plans, will no doubt increase your success tenfold. A simple search in your state, country and location should give you the information you need to get started with choosing, and opening one of the more reasonable and financially rewarding investment accounts.

Savings planner:

There are financial planners in all walks of life, some people even have family members who can help set up a financial plan that will accrue the funds you need when the time comes to buy your home.

Financial planners are inexpensive, knowledgeable, and can point you in the right direction because they know which mutual funds and TD’s/CD’s are lucrative and successful, and these people are worth their weight in gold. Your savings plan is what is going to get you into your new home and should be considered high on your list of priorities.

A final tip about your new home:

Location – In real estate school, the one rule they repeat over and over, and drill into their students after asking the question: What is the most important component of buying real estate? The answer – location, location, location. Doing your research will pay off in the long run because the statistics say to buy the least expensive home in the best neighborhood, nearly creating equity before you even move in.

A good real estate professional knows this rule, and will work with you on making a good, sound and lucrative investment. After all, your home is the biggest investment most people make in their lifetime.

Kristy Ramirez writes for Life Insurance Finder Australia, a free life insurance comparison website, where she helps people to compare and select the best life insurance or income protection insurance policy to meet their needs at the cheapest possible price.

 

 

{ 6 comments… read them below or add one }

Larry Buckalew September 15, 2011 at 11:31 am

Great information…. Love the content!!

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Janice September 21, 2011 at 5:04 pm

Saving for your first home can be a very long process. In my experience, my partner and I had to chip in and really had to budget our expenses. It was a painstaking experience but well worth it.

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Rochelle September 22, 2011 at 12:28 am

Thanks for this!

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karie@tax lien certificates September 24, 2011 at 2:16 am

Wow! very helpful tips especially for first time home buyers. Thanks for sharing.

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Tatiana September 29, 2011 at 7:10 am

Great tips, thank you. I like very much “Pay yourself first plan”, but it is really difficult to keep doing(at least for me), there is always something else where you have to spend that money. But may be for such purpose as buying home it would work.

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Joel MacDonald October 20, 2011 at 8:48 am

Great advice. You know this is very timely. I’ve watched couples who are really making sacrifices just so they can buy a house within their budget. You know, even if they already like a property so much and they know that it will be good for them, they still wouldn’t take it, just because their short on money. It sure is good to save up and prepare to buy a house, that’s the sacrifice worth making.

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