If you are a first-time home buyer, coming up with the money needed for the required down payment on your first home purchase can be challenging.
It’s much easier for current home owners to come up with down payment funds. They can simply apply all or a portion of the proceeds from the sale of their current home to the purchase of their new home.
Many first-time home buyers need to change their spending habits in order to save enough for the down payment on their first home purchase.
Here are six budgeting tips that will help you get into your new home faster:
1. Cut back or eliminate spending on luxury or non-essential items.
If you are in the habit of dining out daily or weekly, you might be surprised at how much money you can save by preparing more meals at home. Restaurants typically mark up their food costs by 300% or more. If you examine the amount you spend each month on dining out, you may discover that you can easily save several hundred dollars a month just by eating at home more often. Cutting back on other luxuries like hair styling, nail salons, day spas, Starbucks coffee and so on can also help you achieve your down payment savings goals relatively quickly.
2. Spend less on entertainment.
If you frequently attend movies, concerts, live theatre, sports or other entertainment events, chances are you can find an extra $100-$200 a month or more by cutting these expenses out of your budget.
3. Trim your clothing expenses.
Before splurging on a new dress, suit or shoes, take a close look at what’s already in your closet and ask yourself if those purchases are really necessary … or if they can be postponed until after your new home purchase is completed.
4. Postpone a vacation
Even a modest low-budget vacation can set you back $1,000 or more by the time you pay for transportation, lodging, meals and entertainment. Consider substituting a “staycation” for a vacation and spend your free time exploring and enjoying local sites instead of exotic new sites. Remind yourself that the long-term benefits of home ownership will far outweigh the short-lived enjoyment of an expensive and exotic vacation.
5. Postpone big ticket purchases.
Purchasing a new car or major appliance on an installment plan will impact your ability to qualify for a home loan and eat into your down payment savings.
6. Take a second job.
If you’ve cut back on spending as much as you can and still come up short, it may be necessary to take a second job temporarily until you reach your savings goal. See if you can find a part-time job waitressing, bar tending, pet sitting, or applying other skills you have on a freelance basis to raise the funds you need for the down payment on your home.
While it may be painful and uncomfortable to adjust your spending and saving habits for the short term, just keep reminding yourself that these are temporary limitations and the reward of home ownership will make it all worthwhile.