Buying a home is the American dream. Most people will save money for years to make this dream a reality.
But situations may arise that force you to buy a home sooner than you had planned. Maybe you have an unexpected new family member. Maybe you are forced to relocate for a job and finding a house in your new location is the best option.
In these instances, you will need to save money to buy a home fast. Here are some things you can do to achieve that goal.
Create a Budget
The first step you will need to take is to create a budget. This will let you know what kind of house you can afford and how much you will need to save to pay for it.
When saving for a house, most of use think of how much money we will need for the down payment. However, there are a lot of other expenses involved. For example, there are also the closing costs, the cost of furnishing the apartment and moving expenses. You will also want to have enough saved up to get you through the first few months of payments.
It’s important to take all this into account when determining your monetary goal.
Let’s face it, most of us want to make our first home a dream home. We want a home that’s in the perfect neighborhood with the right amount of beds and baths. We want a home that looks great and is in terrific condition.
But when you need to buy a home quickly, you have to be realistic. It’s likely you won’t be able to save the money you need to buy your dream home. Therefore, you may have to settle for a home that’s not exactly what you had hoped.
Looking on the bright side, you can always use the equity you have in your current home to buy a new home somewhere down the line. Furthermore, if the home you’re buying needs some improvements, this gives you a chance to update it to get way more money than you paid for it when you decide to sell.
Prioritize Your Payments
Paying your rent should always be your first financial priority. When saving for a home, paying off credit card debt should come second. This will improve your debt to income ratio while getting rid of unnecessary interest expenses. It will also give you a cushion to absorb unexpected costs that may be incurred during the home buying process.
Build Your Savings
Typically, it takes a while to build enough savings to pay for a new home. But even in rushed conditions it’s never too late to start.
The best way to save is to set up a system that automatically deposits money into a savings account. Figure out how much you can afford to set aside and set up automatic transfers to ensure that the money is going into your savings every month.
Take on a Side Hustle
The more income you bring in, the faster you will be able to save.
Look around your house to see if there are any items you can sell to increase your income. You can also take on a side gig like freelancing, doing yard work or babysitting to bring in more revenue.
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Reduce Your Daily Expenses
Think of the money you spend each day and decide what you can cut back on. For instance, you may be buying an expensive coffee or eating lunch out when you could be bringing those items from home. You may be going out to a movie every weekend when you could be renting and watching at home.
Taking small steps like these will give you more money to stash away in your savings, and every little bit makes a difference.
Pay with Cash
Research has shown that people are likely to spent 15-20% less when they pay with cash. Try leaving your cards at home to see if this system works for you.
Cut Back on Household Expenses
You may be able to cut down on your household expenses to save money. For instance, using cold water when washing your clothing can save energy which will result in savings on your energy bills. Not using the dryer can also reduce your bills or your clothes washing expenses if you live in an apartment.
Eliminating drafts and turning your water heater down to 120 degrees can also save you money on energy bills.
Another idea, try calling your cable and phone services to see if they have any specials and deals available that will help reduce your bills.
Use Your IRA
You can use the money from your IRA to help pay for your home. When you use money from your IRA to buy a home, you will not have to pay the 10% early withdrawal penalty. If you have a traditional IRA, you can borrow up to $10,000 without paying the penalty but you will still have to pay taxes. If you have a Roth IRA, you will be able to withdraw the money without paying a penalty or paying taxes.
Cash in on Tax Credits
When doing your taxes, make sure you are taking full advantage of your tax credits. For instance, there’s a tax credit for low to moderate income taxpayers who save for retirement. Eligible tax payers can get credits that cover retirement accounts including 401k, 403(b), 457 Plan, Simple IRA SEP IRA and traditional and Roth IRA’s.
Low to moderate income workers may also be eligible for Earned Income Tax Credit, child credits and more. Talk to your tax professional to find out what you are eligible for to get a maximum return that can help you cover your home buying expenses.
Lower 401 Contributions
It’s great to save for retirement. But if you are still years away, consider lowering your contributions until you have enough saved to buy a house.
Look into Lowering Student Loan Payments
Student loans are another major expense. If you’re still paying off your student loan, you maybe able to lower the amount you’re paying.
If you have a federal loan, you may be eligible for an income-based repayment program. If so, income and family size will be taken into account to find a payment plan that works better for your budget.
You may also be able to defer your payment until you purchase your home. However, this may end up increasing your interest rate. If this is the case, you need to decide which is more important, saving up for a home or getting rid of the student loan.
Most people will save for years to get enough money to afford a home. But if circumstances arise that force you to buy a home quickly, there are options that can help you reach your goal. Which of these will work best for your financial situation?
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