Owning your own home is one of the most reliable ways to build wealth over time. For many people, buying a house seems out of reach financially. However, when you know the facts about what you need to purchase your own home, you may find that it's much more of a possibility than you thought. The experts at Chatham Homes Realty have all the facts you need to make this dream a reality in North Carolina.
How Much Should I Save to Buy a Home?
The first question you need to ask is exactly how much you need to save to start down the road to homeownership. This involves determining how much you can afford to spend on a home, creating a budget plan to save for a down payment and closing costs, as well as exploring financing options to secure a mortgage loan. It may not be as difficult as you're expecting, so it's important to know about the actual costs you'll be facing.
Knowledge is power, so here are some of the facts to consider:
Find Out What You Can Afford
Before you can make a plan, you must know the price you're able to pay. It's an excellent idea to get preapproved for a loan before you even begin the search for the right house. The lending institution will let you know how big of a loan you qualify for and how much the payments will be, including the down payment.
Once you know how much you can borrow and what it will cost, you can get ready to make your dream a reality.
Don't Fall For the 20% Myth
Many people believe that they need a down payment that is at least 20% of the loan's value, a number that seems impossible for most people to save. But this myth only stems from the fact that having that amount for a down payment means you don't have to pay for private mortgage insurance (PMI) with most lenders.
PMI can be costly − for a $300,000 house, you'll have to pay around $1,500 to $3,000 a year. Although, that amount is rolled into your mortgage payments, and it's much easier for most people to afford that than to come up with a $60,000 down payment on the same house.
It's Possible to Pay Just 3% Down − Or Less!
If both your income and credit score meets the qualifications, getting a conventional loan that only requires 3% down is possible. If that's still not low enough, it may be possible to pay even less. People who qualify for a loan through the Department of Veteran Affairs (VA) or the US Department of Agriculture (USDA) can purchase a home for no money down.
If neither of those options works for you, check into the first-time homebuyer assistance programs in your area. You may qualify for financial assistance with your down payment. In some programs, the money they loan you doesn't have to be paid back as long as you keep the house for a certain length of time.
How to Save Money to Buy a Home
Once you have an accurate picture of how much money you'll need to buy a home, the next step is to save up that amount. Putting money aside isn't easy, but when you have an exciting goal you’re working towards, it makes the process much more enjoyable.
Here are a few ideas to get you started:
Is it possible to move into a smaller rental home? Do you have a family member you could stay with for a little while? It may not be the most comfortable solution, but that could fuel your drive to save every penny you can and help you save a significant amount of money on rent.
Cut Back on Bad Habits or Eliminate Them Entirely
We all have those small indulgences that aren't doing us any good. Breaking up with your favorite food delivery service or quitting smoking will help you save money and make you feel better in the long run. You know you should invest in your health; let the dream of investing in a home as well be the extra motivation you need.
Ask For a Raise
Are you getting paid what you're worth? Are you sure? If you haven't gotten a raise in a while, or if your research suggests that you're underpaid for what you do, make a plan to discuss this with your boss. As long as you do it professionally and respectfully, asking doesn't hurt.
Pick Up a Side Job
The gig economy may have drawbacks, but it makes it easy to pick up some extra work during your free time. Consider driving for a rideshare company, delivering food, tutoring students, or doing other side jobs to increase your income. Remember, this isn't something you'll have to do forever - just as long as it takes to reach your goal.
Attack Your Debt
Paying down your debt has two advantages: it frees up money to save and boosts your credit score. Focusing on knocking out your highest interest rate debts first will save you the most money in the long run.
Automate Your Savings Plan
Sign up to have a set amount deducted from every paycheck and deposited in savings. You can do this easily with your employer or your bank. Does the extra money you have available at the end of the month always get spent? If you don’t see it sitting in your checking account, you can’t even be tempted to spend it.
Take the First Step Toward Owning Your Own Home in North Carolina
Hopefully, these tips will help you see that purchasing your own house is not impossible. When you're ready to take the next step, the experts at Chatham Homes Realty in Pittsboro and Siler City, NC are here to help you make your dreams come true. For more information, we invite you to contact us today.