Despite the currently high mortgage rates and property prices, buying your dream home still comes with many advantages. But the challenge is often saving enough for a down payment, which can reach up to 20% of your future home’s price, and additional closing costs.
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How To Survive on $500 a Month: A Frugal Living Guide
How long it will take to be financially ready to buy a home will depend on factors such as the property’s price, your current monthly expenses and income, and any alternative sources you have for getting funds. You can try practicing these seven frugal habits to speed up the saving process.
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Look for Ways To Downsize
Having large monthly expenses can easily hinder your progress toward saving for a home. One way to free up cash is to consider your current living situation. For example, it might make financial sense to move in with family or get a cheaper apartment in the meantime.
If you have an extra vehicle you can part with, those proceeds could go toward your home savings fund as well. You would also save on costs like gas, maintenance, insurance and registration fees.
Revisit Other Budget Items
Even small monthly expenses can add up and leave you with less cash to put aside for your future home. So, go through all your budget items to see if there’s anything you can completely cut, such as your streaming memberships or restaurant outings.
You can then focus on necessary expenses and consider ways to reduce them. Here are a few ideas:
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Buy groceries on sale, with coupons or in bulk.
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Cut back on your electricity, gas and water usage.
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Revisit your insurance policies for potential discounts or coverage changes.
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Consider downgrading cellular, internet and TV plans.
Resist Unnecessary Purchases
To reach your homeownership goal, you must watch out for impulse buys and other unnecessary purchases. These can easily use up spare cash you have, so only buy what you’ve budgeted for and avoid places that tempt you.
When tempted to buy something else, consider holding off if the purchase amount exceeds 1% of your yearly gross income. And if you can’t go without the item, look into frugal options first, such as buying it used or borrowing it.
Stick To Staycations
Since vacations can cost thousands of dollars, forgoing them temporarily can be a good way to boost your home savings fund. Rather than traveling, look for free or cheap destinations close to your home.
You might visit parks, pools or community centers or check out events at your local library or community center. You can also get creative with fun family activities at home, such as backyard camping, scavenger hunts, game nights, movie days or spa days.
Boost Your Income
While cutting costs is great, you could save even more toward your home if you increase your monthly income. With some planning, you might make a case for a raise or promotion and present it to your boss. You could also look into changing jobs.
Another option is to research some of the best side hustles, including part-time work and passive income options. Here are some examples:
Watch Your Debt
Debt can hurt your home purchase plans in multiple ways. First, the monthly payments and interest charges take away cash you could be saving. Then, the debt balances hurt your debt-to-income ratio, potentially making it more challenging or expensive to get a mortgage.
Although you may find it hard to knock out debts while saving for a home, it’s worth considering so you reduce interest charges and improve your mortgage approval chances. At the least, you should avoid taking on additional debt while you save.
Find Sources for Free Funds
Your down payment and closing cost funds don’t all have to come from you. Especially if you’re a first-time homebuyer, you can find several assistance programs through the government and certain lenders. Research what’s available locally and check for rules, including income and house price limits.
Plus, consider that loved ones may be willing to financially help you get your dream home. Just keep in mind your lender might require you to contribute a certain amount or it may limit the types of acceptable givers.
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This article originally appeared on GOBankingRates.com: Housing Market 2024: 7 Frugal Habits That Can Help You Save For Your Dream Home
