Saving money is a lot like losing weight. It’s no fun, requires sacrifices and no one at a dinner party wants to hear about your plan. For many first-time home buyers, trying to save for the down payment can seem like a never-ending diet. You may be tempted to click an e-mail link that promises magical results, when you know there’s no magic pill for weight loss or saving money.
Fortunately, if you’ve ever tried to diet, you already know how to save money. While most weight loss is temporary, buying a home won’t disappear if you skip the gym for a week. You’ll be living in a home you own, building equity and moving closer to financial independence. So, here are tips to get you to your down payment, based on what you know about trimming your waist:
Don’t bite off more than you can chew
One of the biggest mistakes new home owners make is buying more house than they can realistically afford. At United Texas CU, we want to get the right loan for you so you can move into the home that’s comfortable and fits your lifestyle. That doesn’t mean you have to use every dollar you qualify for. Let’s figure out how much you can spend every month and make sure you don’t get in over your head.
A good guideline when planning is that you want to put down around 20 percent of the sale price. Before the financial crisis, a lot of people were putting down 10 percent or considerably less – as little as 0%. It didn’t turn out well for many of those folks, nor did it for their lenders.
Even if you feel comfortable with the risk that comes with a low down payment, putting down more money now can lower your interest rate, so you’ll pay less money in the long term and have a lower monthly payment. It’s easy to see the down payment as your goal and forget about the rest of the mortgage, but this won’t be the last purchase you make. You’re going to want to save for college, retirement or your dream vacation. If you don’t put the money in now, you’ll have to do so later, and you’re essentially taking a loan from yourself against those future purchases.
No matter how long you run, you can’t burn off that midnight cheesecake
You may be making sacrifices and saving as much as you can, but still not feel like you’re getting any closer to your dream home. You’re not alone. Unlike their parents or grandparents, today’s typical middle class family has more than one job, and a surprising number has three or more sources of income. Even with the popularity and necessity of taking on a second job, some people are embarrassed to do so, as if having a working spouse or taking on extra work on the side is a sign of failure. Don’t be that person who’s too embarrassed to go to the gym because they don’t want anyone to see them get healthy. There’s no shame in working.
You can’t diet without a scale
Most people keep track of their weight every day while on a diet. Some keep a food log. Some count calories, points, or carbs. You need to see how you’re doing so you know when you can splurge and when you need to cut back. The same is true when saving for a home. Make a budget and stick with it. If you have a bad month, don’t get frustrated. Instead, commit to doing better next month.
Everyone needs a spotter
When you save money every month, where does it go? Do you have a series of Mason jars filled with crumpled singles? Is it sitting in your checking account, looking pretty when you check your balance but not doing anything else? Even if you keep your money in one of our savings accounts, there’s more we can do to help make your money work for you. We have a variety of great savings plans, from low-risk share certificates to money market accounts, which earn a higher dividend rate for your savings. Money Market accounts include no-penalty access to your money if an unexpected emergency occurs.
If you want to own a home, you need to save money, but you don’t have to do it alone. Think of us as your personal trainer for your financial health. Contact us and we’ll help you figure out what you can afford and how you can get there. Our plans are always easier to swallow than a kale smoothie. But then again, what isn’t?
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