Wondering how to afford your first home? Almost everybody has a dream about buying their own home. It can be one of the most exciting and relieving experiences of your life. But, you’ll have to put a lot of work into it.
Most of that revolves around getting the money together to buy a house. Even if you’re getting a mortgage, trying to afford your first home can be challenging. You could think that a home will be outside of your financial reach.
But that might not be the case. You could make it more affordable than you’d think. Here’s how you can afford your first home.
How much does a house usually cost?
Before you can figure out how to make a home more affordable, you’ll need to know what it actually costs. Naturally, each property will vary. You might not be able to do much about the asking price, however, beyond trying to negotiate it down.
There are several other costs that you’ll need to be aware of. These are the ones you’ll need to focus on when reducing a property’s price. By doing so, you’ll yourself some money.
You’ll need to know what costs to expect with this.
- Mortgage Repayments
- Property Taxes
- Homeowners Insurance
- Mortgage Insurance, and
- Escrow Payments
You might also need personal liability insurance, among other things. Having a budget will also be important.
How much should you spend on your first house?
So how much should you spend on your first house?
This will all depend on your personal situation.
- Are you paying with two incomes?
- Are you low income?
- Do you have 20% to put down?
Typically, your home buying budget will follow the 28% rule. In other words, your mortgage shouldn’t be more than 28% of your gross income each month. However, depending on your situation, you could go up to 35%, but that should be the absolute HIGHEST end that’s recommended.
Related: How to Buy a Home on a Low Income
How You Can Afford Your First Home
Ready to buy a house? Here are the best tips to help you afford your first home.
Take Care Of Your Credit
When it comes to your mortgage, one of the most prominent factors in your repayments will be your credit score. It’ll also make a significant difference in whether or not you can get a mortgage. You should make sure that your score is as high as possible (preferably 650 or higher).
Not only will this make sure that you qualify for a mortgage, but you could end up paying much less over time. That could save you thousands of dollars! While this could take a large amount of effort, it’ll be worth it.
Most people won’t be able to pay for their homes without a mortgage. That typically means that they go to a bank that they’re most familiar with. But you shouldn’t look at just one financial institution for a mortgage.
It’s worth shopping around, as it could save you a significant amount of money. Looking for the best interest rates will be a priority. While the difference may seem marginal on paper, it adds up more than you’d think. Even one or two percent could mean thousands of dollars in repayments.
Getting the best deal is possible, you just have to do the research.
Close At The Start Or End Of The Month
Want to know how to afford your first home? This one might be a big key for you.
Most people don’t realize that when you buy your home matters significantly.
A lot of this revolves around when prices are going up versus when they’re going down. Even the time of the month can matter when it comes to some costs. The likes of insurance and taxes will need to be paid at the end of the month.
The closer to this that you finalize the purchase, the more you’ll be liable for this. By choosing to close at a specific time of the month, you might be able to overcome these. While you’ll still need to pay for them eventually, you’ll give yourself a certain amount of breathing room.
Commit To A Savings Goal
Once you’ve decided to buy your first home, you’ll need to start saving for it. That won’t happen unless you make it a priority. Committing to a monthly savings goal will be an effective way of doing so. To do this, you should look for areas to cut back on.
A lot of this can vary from person to person. By finding areas where you spend too much or can afford to cut back, you’ll save much more money than you’d think. Some of the more notable areas of this would be by cutting down on how often you eat out or buying fewer clothes.
You could also start looking for low-cost alternatives to some of your necessities. While these might seem like minor savings, they can add up significantly.
Downsize Your Vacation & Wedding
One way to afford your first home is by increasing your savings as much as possible. The more money you have, the more you’ll naturally have to spend. There are multiple ways that you can do this. One of the more notable is by downsizing your vacations, if not outright skipping them.
That will add a significant bit of money to your overall savings. The same can also be said of your wedding (if you have one). While you shouldn’t have to skip this completely, it could be worth downsizing it a bit. By doing so, you could add much more to your house fund than you would have thought.
Adjust Your Expectations
Everyone wants to have a dream home for their first house. It’s rare that this will match up perfectly with reality. You may need to adjust your expectations, but that doesn’t have to be a bad thing.
You could find a home that you love just as much in a different neighborhood. Or cut down on what you want in the house. It could be worth having a list of necessities and beneficial “extras”.
Aiming for a property that meets all of your necessities will be a priority. After that, you can compare houses based on which of the extras they offer. However, always remember to be realistic.
When most people think about buying their first home, they think of one that’s already built. Others will want to build their dream home from scratch. Both of these options could be quite expensive. You could find a nice balance between them by purchasing a fixer-upper.
These will be structurally-sound houses that need visual and/or landscaping upgrades. But that makes them much more affordable to buy. While you’ll have to spend money on renovating, these renovations could be much more affordable than buying a brand new house.
How To Save Up For A House
Regardless of whether you know how to make a home more affordable, you’ll need to save up for it. That could be tricky because of how expensive they are. You can take advantage of more than a few tips and tricks, however. That should let you save up quite quickly.
Some of the more notable tips include:
- Build a high-quality budget
- Consider downsizing to a smaller home or apartment
- Cut out any bad habits that cost money
- Ask for a raise at work
- Start a side hustle and save the extra money
- Rent out a spare room or parking space
- Automate your savings as much as possible
Figuring out how to save up for a house might be quite challenging. It’s not impossible, however. Using each of the above tips will help you save up faster than you thought you would.
Many people think that it’s impossible to save up for a home in this economy. But, while you might not be able to reduce the asking price of a house, you can reduce so much more. That’ll affect the overall cost of the property itself.
Knowing the numbers, taking steps to minimize extra costs is more than recommended. Though that means putting in the work now, it removes a lot of stress and spending long-term. With those kinds of benefits, there’s no reason not to take advantage of them.
How to Afford Your First Home – Are You Ready?
Now that you’ve studied up and learned all about how to afford your first home, are you ready to take the next step! It’s a bit of a scary one, but it’s also SUPER exciting! As long as you don’t stretch your budget too thin and you buy a house that you’ll enjoy for 5+ years, I’d say you’re doing quite well.
Consider all the options, but don’t stress out about it! Have fun, and enjoy the experience!
AUTHOR Kimberly Studdard
Kim Studdard is a project manager for online entrepreneurs and small businesses. When she isn't spending time with her daughter and husband, or reading her growing pile of horror books, you'll find her working on her HR degree and working towards FIRE.