Congratulations on your decision to purchase a brand-new home. With so many decisions to make during the home buying process, it is so easy to get overwhelmed and easily become stressed. Don’t worry, we are here to help!
Your first step in buying a home is to fully understand your finances. Well, this is not the fun stuff like looking at homes on Zillow or going to open houses. Understanding your finances is an important and necessary step to help you determine how much home you can afford. Depending on your location, $500k in the Bay Area can look a lot different from $500k in Montana, taking into account where you’re at find out what price range is most feasible for homeownership! Want to kickstart your search to find your dream home?
We’ve all heard it; Communication is key!
Do you have money saved, enough for down payment towards the purchase of your new home? Be open about your finances. Have an honest conversation with your partner about your savings, saving goals, spending habits, debt accumulation and budget. Decide on the amount of home you can comfortably afford. Honestly discuss how much money is put away, maybe in a standard savings account, stocks, or retirement. Honest and open conversations with your partner will help you prepare for what you are getting into. Money is usually the leading cause of disagreements in marriages and communication especially on finances is everything. You must start with a conversation.
Each person has a different view on how to save and what to spend their money on. If you or your partner is the excessive spending type, this is a decision that will require some Now more than ever is the time to openly discuss your finances and how you will start saving for your new home.
Got Goals? Create a Plan
You have big goals about owing your own home someday, you must create a plan. Take a look at your bank accounts and determine what comes in and what goes out every month. Set up a “house-buying savings account” and allocate the amount of money to save every month.
Decide on what kind of house you are looking for and how much. Decide when you can purchase your home, will this be in a year, two or five years? Create a two-year or a five-year plan with the intention of saving enough money for your new home. Once you create your plan, take charge of your finances, and stick with it.
Saving for a house can be such a prolonged process, it can be difficult to maintain motivation to keep going and striving. Seeking professional advice from an accountability partner will move you closer to your goal. If needed, a financial advisor can help you develop a financial plan for your financial goals and can help you achieve them.
Cut Back on “Little Luxuries”
If you are trying to figure out how and where to save money and you feel like you’re living paycheck to paycheck, start by reducing your expenses by 10%. That means if your monthly grocery budget is $500, reduce it to $450 and save $50. Yes, you can! Cut back on your daily Starbucks run, weekly visits to the movie theater or occasional meal deliveries. Unbelievably, these little luxuries do add up! Choose to cook your meals and ditch the expensive restaurants. Other luxuries to temporarily put on hold could include, cable TV, manicures, messages, spa, magazine subscriptions and so forth.
Decide with your partner what luxuries you both need to put on hold and begin saving. These little luxuries can wait. Do not loose sight of your big vision; that is, your new home!
Going down? Down-size and Get Into a Cheaper Place
So, you have set your goal and have determined that you will be able to purchase your new home in a year. If you are living in a rental, consider downsizing and moving into a smaller and less expensive property until you reach your savings goal. Even if you choose to down size for the long run, that’s even better!
Downsizing to a smaller home means less upkeep, lower bills, and more money into your “house-buying savings” account.
Get a Side Hustle ~ Create Multiple Streams of Income
Find a way to make a quick buck to help boost your down payment savings. Consider spending a few hours a week driving for a rideshare service, shopping or delivering meals for an online delivery service, babysitting or pet sitting. Thanks to technology, there is an ever-increasing number of freelance opportunities that require little to no qualifications at all. You can find several ways to earn extra cash to put away for your home.
Monitor Mortgage Rates
Many home buyers purchase homes in the spring and summer months and, as a result, this is generally the most expensive time to buy a home. So make sure to look at trends and the state of the economy to get the best deal on your dream home!
What to Keep in Mind
In a nutshell, buying a home typically requires lots of savings, enough for down payment and closing costs. Work with your partner to potentially reach your financial goal. Plan well, set goals and buy what you can afford. Buying a home is one of life’s biggest milestones and the largest purchase one will ever make. With proper communication, budgeting, and focus, you and your partner will be able to save enough money for your home.
If you’re thinking about. tying the knot one day, consider looking into a prenup. A prenup is an agreement between your partner and you about how assets will be divided in the event of a divorce – this means figuring out what stays between you guys and how to keep what was yours to begin with. Check out what is a prenup for more info on how you can go into your new life with complete financial peace of mind!
Julia Rodgers is HelloPrenup’s CEO and Co-Founder. She is a Massachusetts family law attorney and true believer in the value of prenuptial agreements. HelloPrenup was created with the goal of automating the prenup process, making it more collaborative, time efficient and cost effective. Julia believes that a healthy marriage is one in which couples can openly communicate about finances and life goals. You can read more about us here Questions? Reach out to Julia directly at [email protected]