You’ve been watching the Columbia SC real estate market for some time, and have decided you want to start thinking about buying your own home. Now what?
The first step is to get pre-qualified for a mortgage to give you an estimate of how much you can afford. Once you have an idea, you need to start thinking about saving for a down payment. Depending on the type of loan, you may need to save anywhere from 3% to 20% of the value of the home. Obviously, the larger the down payment, the lower the monthly payment will be.
Stay Motivated
Sometimes when you have a savings plan that could take years to complete, it can be hard to stay motivated. One way to stay on track is to visit open houses. Even if you’re not ready to buy just yet, you can see what you’ll be able to get when you reach your goal. It’s so much easier to stay motivated when you can start picturing yourself enjoying your new home.
Automate Your Savings
Nowadays it’s so easy to set up an automatic deposit into a savings account. You can set it up through your employer, by asking them to direct deposit a specific amount (or percentage) into a separate savings account. Some employers will even let you split your pay into three different accounts.
Or, you could also set up automatic transfers from your checking account to your savings fund. The benefit of doing this is that it would be easier to either cancel it (but you should avoid canceling this transfer, if possible) or changing the amounts.
Cut Out Un-Neccessary Spending
Almost every single article about saving money will tell you this. No need for me to explain in depth how little things add up. So, try to pack your lunch and reduce your daily, frivolous spending.
Look at ALL of Your Financing Options
You could tap into other resources you hadn’t thought about. For example, you could borrow from your 401k and pay a decent interest rate. Another option is to make a penalty-free withdrawal from your 401k or your IRA, if this is your first time buying a home. However, keep in mind you will have to pay taxes on the amount withdrawn.
If you have a Roth IRA, it’s even better. Since the money you put in this account has already been taxed, you don’t pay taxes on any withdrawals. Also, if this is your first home, Uncle Sam won’t penalize you for using these funds to buy a house either.
Of course, before you decide to do anything with your retirement funds, consult with your tax advisor.
Let Your Friends and Family Know About Your Plans
There are two reasons why this is important:
- With the holidays fast approaching, they will understand that you’re trying to save for a house and their gift expectations won’t be as high.
- You never know, they may even make a “donation” to your house fund for Christmas.
So there you go, some tips on how to make your goal of owning a Columbia SC home a reality.
Have any other tips? Please share them with us! Just click the comment link below and let us know your tips for saving that down payment.