Home buying can be SCARY! Trust me, I know. I have done it twice now. The first time we purchased it was so long along ago and restrictions were much more lax. We literally didn’t put down a penny and bought our first home. Fast forward 9 years and it’s a whole new ball game. Most of you know we are in the process of moving across the country for a job change and so purchasing a home was top on our list- but owning this home here in Arizona still has made that process quite a bit more challenging. Times are different and regulations and restrictions on loans are more intense and way more complicated. Don’t let that scare you though because the benefits of owning a home way out weigh the drawbacks. Chances are, purchasing a home will be the single most expensive thing you ever purchase in your life- EVER- so you want to go into it knowing what you are up against.
There are a lot of qualifications when it comes to buying a house but the two most important ones (and what can make the difference between actually getting those keys and not) are 1) YOUR CREDIT and 2) MONEY UPFRONT. These two things are the deciding factors when it comes to purchasing or not. Credit is obviously built up long term and can’t be changed overnight, and having money upfront is the same, but it easier to do, with some planning and foresight. When you are looking to buy a house you will soon realize that the bank wants to know every single thing about your finances- and why wouldn’t they? Taking out a loan for a house is a huge amount of money and they want to be sure you can pay it back. Far gone are the days where anyone could get a loan for a house. You need to show you have enough money upfront.
What do you need money upfront for? Well, lots of things. First and foremost there are oodles of fees and closing costs that go along with purchasing a home. Sometimes these costs can be all or partly paid by the sellers (called “tying in your closing costs”) and other times you have to pay for them. Secondly, you will need money down. Different banks and different types of loans require different amounts down, but no matter what kind of loan you have, you will have to put something down- and the more expensive the house you are looking at is, the more you will have to put down. The key is to start planning ahead of time and budgeting so you can save some money for all of these costs. Budgeting is never easy (I know!!) but with some small changes, you can begin to stock some money away and save for the home of our dreams!
1. Make a plan
Taking on a large project like saving for a house can feel like eating an gigantic elephant. So you don’t become overwhelmed or discouraged, set mini goals by which to measure your progress. Choose an amount to save over the next couple years and break it down into monthly or bi-weekly installments. Pace it out and give yourself some incentive. When you reach a certain goal point, treat yourself to something special for the job well done- keep it on the cheap though, or that would defeat the purpose! Stopping to take stock and bask in your success will motivate you to keep going
2. First start big
If you’re truly committed to buying a home and can handle some big changes in lifestyle. Something like downsizing your car or moving to a smaller place can help you save a lot of money fairly quickly. Getting a part time job on the side or finding something to do at home for some extra cash can be good too- just be sure to stock pile that extra money away instead of spending it.
3. Then look small
After you have made any larger changed, next go through weekly, monthly and annual spending habits and really getting honest with how you are spending your money. Make lists of fixed expenses and track your expenses. All of those little expenditures (like that daily Starbucks run) can add up big time over the course of months. See where you can cut and be sure, again, to stash those little savings away in a special account.
4. Check out your IRA
First-time homebuyers can often cash out up to $10,000 from an IRA without having to pay the standard 10 percent early withdrawal fee. If you’ve been saving in an IRA, check your balance, and consider cashing out a little part of the money to put toward your down payment. This amount may be just what you need to get enough money to buy that dream house.
5. Do your research
Do your research and build your resources. Loans and interest rates can vary greatly, so be sure to shop around. Just getting a loan with a few less points will mean a lot of money savings for your in the long run. Everyone’s situation is unique; it is by no means a one-size-fits-all market so don’t settle for the first loan you research. Often banks will be looking for new customers and can offer promotional rates and other benefits that are exclusively available when opening up a new account. You should consider opening up a new account at a financial institution that offer you a fantsastic promotional rate for new customers.
There are always such great resources online for helping first time buyers know what they can expect. One amazing resource is the CapitalOne Loans Online Neighborhood
which is a free online resource where you can learn all about home buying. They have gathered so many easy-to-understand articles and helpful videos, as well as information about
Home Loans offerings so you can be sure you are getting the right loan for YOU. Their friendly online neighborhood covers all stages of the home buying process – from deciding whether now is even the right time to buy and how much home you can afford, to the documents you need to apply for a mortgage. Buying a home is an important process, but definitely not a simple one – Capital One’s new online resource can really help lay the groundwork of knowledge with a glossary of terms you should know, an overview of the loans available and even more. Be sure to check out their
for many useful tools to get yourself educated on the home buying process.
Overall, buying your first home will be one of the most stressful but exciting things you do in your life. Not only is it beneficial to your credit and portfolio, but it will bring you such a sense of pride to know that YOU own that house. Start early and save lots and be sure to check out all of the tips and tricks on
CapitalOne’s Online Neighborhood too!
What are your favorite big time budgeting tips for saving for something BIG?
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.