For first-time home buyers, setting aside enough money for a down payment and closing costs is often one of the biggest hurdles to homeownership. And when you factor in insurance, taxes, maintenance and other costs associated with owning a home, the total amount of money needed can seem overwhelming.
So how can you stop spending and start saving? We asked a few personal finance bloggers to share their tips and tricks for building a home-buying nest egg.
What saving strategies did you use for your mortgage down payment?
My wife and I worked out how much money we would need and set about saving it each pay period. This diverted a large part of our salaries into a specific savings account. We bought our first home in our mid-20s and upgraded when we were 30. The trick is to get a foothold in the property market and build on it. – Colin Williams
What is the primary expense you cut to save money for a down payment?
Cable television was the biggest expense I got rid of. It helped me save $1,000 yearly. With video streaming services like Netflix and Hulu, I felt I didn’t really need cable TV anymore. I started watching the free over-the-air channels more frequently. It just cost me the value of an antenna. – Edwin C.
What is the most valuable budgeting guideline you've learned and live by?
I think it's simply to have a budget, track your spending against that budget and review your progress regularly. The old saying that you can't manage what you don't measure is quite true when it comes to family spending. When an individual or family tracks their spending for the first time for a month or two, they're invariably amazed by how much they're spending on certain things: $62 last month at Starbucks, $223 on shoes?!? I think many people refuse to budget because they fear having their eyes opened to how much they're spending and on what. But meeting your goals is a lot easier if you track your progress. – Kurt Fischer
How did you determine how much home you could afford?
I used many different tools that were available for free at the time. I also spent what may be considered as an unhealthy amount of time on Zillow looking at every bit of information about the process. I felt that the more I knew about my finances and the market, the better armed I would be when we had the money to purchase. – Warren Talbot
Did anyone advise you on how much home was affordable? Was the guidance helpful?
My wife and I have always earned more than we spent, so we were able to accumulate a large savings. But, we did not spend all of our savings on the down payment for our house. Most buyers, like us, rely on a bank or a mortgage broker to tell them how much home they can afford. My wife and I actually laughed at what we were told. We ultimately purchased a house that cost half of what our bank told us we could "afford." If you use all of your savings on a down payment, then you can't afford the immediate expenses that arise the day you move in: furniture, paint, decorations, landscaping - just to name a few. – A Blinkin
Which financial books helped you stay on track to save money?
When my husband and I were first really getting into learning about smart personal finance, business and entrepreneurialism, we read a lot of books. We found that after awhile you stop learning, as each author just sort of says the same thing in a different way, but the most memorable of the books I would say would be "Rich Dad Poor Dad." It motivated me to dig deeper into the personal finance world. – Pennysaver Pam
Do you use any budgeting apps to save for major purchases?
Currently, I’m using HandWallet, which is pretty useful to keep track of my expenses. – ChampDog
When you purchased a home, did you reserve savings for an emergency fund? What do you recommend for future buyers?
We budgeted for a modest emergency fund after taking into account closing costs on the new home. It was not sufficient to cover all the expenses we faced, so the first couple of years were tight financially. Home maintenance costs are always higher than anticipated, especially with an older home.
With my recent home purchase I was unpleasantly surprised to discover the HVAC inspector missed a major problem that will cost me hundreds of dollars to repair. The best advice I can give future homeowners is to educate yourself about the entire process before you engage [an agent]. Hire competent home, HVAC and mold inspectors and know your rights as a buyer. – Paul Vachon
Related:
- Simplify the Home Buying Process
- Why Being Pre-Approved for a Loan Matters
- 4 Foolish Money Mistakes You Should Avoid
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