Let’s be honest: The real estate market remains highly competitive.
Many future homeowners stayed on the sidelines in 2021 hoping for better timing in 2022.
Today, as the economy continues to recover and the market remains active, it’s understandable for consumers to remain a little hesitant still.
If you plan to hit your stride this year and achieve your dream of homeownership, then you will have saved a fair amount of money to pay for a down payment and other costs associated with buying a home.
In addition to savings, the following tips can help you meet your financial goals as you take steps toward homeownership.
Think about how much you’ll need
One of the most important questions homebuyers fail to fully understand is perhaps the most basic of questions. How much money must you save to buy an affordable home?
Depending on the financing plan, homebuyers should plan to come in with at least 3.5% to 5% of the purchase price.
For example, an FHA loan will require applicants to contribute about 3.5% as a down payment whereas a conventional loan will take about 5%.
But that’s not all. In addition to the down payment, consumers will be responsible for closing costs, which pay for a third-party company to get the deal completed.
Check out a mortgage calculator to figure out how much you’ll need to save before applying for a loan.
Budget as much as you can
For some, savings have gone up. The key to building up enough financial capacity to buy a home is to save as much as you can, regardless of your starting point.
If you’re expecting a tax refund or have extra cash, think about stashing it away to save for a home.
As pandemic restrictions ease, stay disciplined with discretionary spending and track how much you spend for a complete picture on in-coming income and out-going expenses.
With a little consistency to your budgeting, you’ll be able to see good and unfavorable spending patterns that will help form your spending approach.
Make money on the side
Now more than ever, it’s possible to make money off a side hustle. Whether it’s delivery services or working a second job at home, there are plenty of opportunities for extra work.
Even if it’s just a couple hundred dollars every week or pay period, the additional income can quickly add up at the end of the year.
While a side gig is a great way to make extra money for your savings, it’s possible that the income will not qualify for your mortgage application.
Apply gift money toward down payment
With most mortgage programs, you can use gifted money toward the purchase of the home.
A family member can assist with a large sum of money for a down payment, which can accelerate your timeline for buying a home.
The financial help must come from an immediate family member to qualify, but some exceptions apply.