It's a very popular dream held by most everyone, and that is to be a home owner. But, investing in a home is no simple accomplishment and you never want to over extend yourself just to call yourself a homeowner. Besides the down payment there are many additional expenses associated with home ownership that renters never need to worry about — property taxes, home maintenance, homeowner's insurance, other liabilities, and the occasional flooded basement, just to name a few. Renting gets a bad rap sometimes, but remember it does offer more flexibility and savings on hand (that you’d otherwise tie up in a down payment). The disadvantages of renting are no property equity or real control. Now, if you’re willing and able to shoulder all these costs — as well as the responsibilities that go along with homeownership — keep reading!
Even before you start saving for your new home, it helps to understand how much house you can reasonably afford. As a first-time buyer a common mistake is thinking you can afford a monthly mortgage payment equal to your current monthly rent. After factoring in all these other ownership-related expenses, you’ll realize it's far more expensive than you might think. And while banks may multiply your gross income by a factor of three or four to figure your maximum loan amount, I believe it’s much smarter and safer to multiply by two or two-and-a-half. Young first-time buyers may want to proceed more cautiously and you’ll appreciate having some additional wiggle room in your budget. Unforeseen expenses have been the demise of many happy new homeowners. You may also be able to qualify for the FHA First-Time Homebuyer Program, which lets you put down as little as 3.5%. It's best to work with a mortgage broker and understand all the different loan options available. So do the math as a first step toward saving and understand what borrowing options you have. From here you should have a better framework for saving.
You might wisely create a New Home savings account and directly transfer a set amount every month to that account and make it the untouchable money. I suggest speaking with banks to see if they offer any special rates or programs for first time homebuyers.
Setting milestones and goals for yourself can be a powerful motivator. Create a reasonable timeline for your down payment... Whatever your situation may be, work out a realistic plan that works for you.
