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Saving for a home on your budget
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When considering saving for a home, you should know what your savings goal is. There are two major criteria that will determine your ability to buy a home:
- How much you have for a down payment
- How much your loan amount will be, based on your current income, debt, and credit rating.
Get Pre–Approved
To find out how much you qualify for, you should contact the Affinity Lending Center to get pre–approved for a home loan. The Hometown Home Loan Program offers mortgage programs that only require 5% or even 3% down which will help you qualify for a home you can comfortably afford.
Start Saving
Using your pre–approval as a parameter, you can start saving for your down payment. Financial advisors suggest that 10%–15% of you net income should go into a long–term savings account each month. The best way to get on top of this is to put money away first, then use the rest of your earning to pay for bills and other necessities. HomeStreet Bank has automatic savings programs that withdraw money from your primary account immediately into your savings account making it easier for you to save. Click here to learn more about budgeting plans.
Reduce Existing Debt
While saving for a down payment, you may also need to tackle your existing debt in order to increase you buying power. Interest on credit cards and car loans are not tax–deductible, while interest on mortgage loans is (one of the many benefits of owning a home). If you have a lot of credit cards with a high amount of debt, you may want to cut up your cards with the highest rates (do not close the account) and start paying them off faster by paying a little extra on them each month and just minimum payments on lower rate cards. You may need to reduce the amount of money that you are putting into savings in order to pay off any non–mortgage debt. Learn more about your credit.
Examine Your Expenses
Lastly, you need to look over daily expenses and other bills. A good strategy for getting a handle on these expenses is to set aside 60% of your gross income to cover bills, food, and committed expenses such as gym memberships. If you are spending more than sixty percent, you are making payments you cannot afford. The remaining 30% of your income should be divided according to your financial goals. Financial advisors suggest 10% go to a short–term savings account for emergencies and vacations, 10% to a retirement account, and the remaining 10% to you as fun money!
If you would like to get pre–approved, HomeStreet Bank's Affinity Lending Center offers the Hometown Home Loan Program that can save you $1000 or more on closing costs. They also offer free homebuyer classes, down payment assistance programs, checking and savings products, and can help you get started on your budget. For more information, contact an Affinity Lending Center.
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