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How to Save for a Down Payment While Renting

Rental prices have gone up, along with the overall cost of housing, making it more challenging to save for one of the new homes in East Grand Forks ND. However, with some judicious saving and ultimately purchasing a brand new home, you could end up with a home that will save you money over the long term and give you some financial breathing room for a few years to build your savings back up without worrying about unexpected home-cost emergencies.

If you’re renting, you probably think a brand new home built for you isn’t an option, but if you can make the savings for the down payment, you will have a home that has a warranty, appliances with warranties, and a home built to higher standards of energy efficiency, not to mention the unlikelihood of having to make any major changes or repairs for a number of years. The savings in energy and lack of repairs will rebuild your savings much faster than with a previously owned home that will likely need repairs sooner rather than later, not to mention aesthetic changes. Our team can help you find the right home for your budget.

Still, you do need a down payment, and when renting, you don’t have the equity in a home to put toward a new home. First you need to know how much home you can afford. Look at  your rent and see if it’s too high to continue or if you can go higher. That will help you understand the price range of the home you can afford. Keep in mind the extra costs involved in closing and moving, as well as home maintenance. Still, the clearer an idea of how much you can afford monthly will help you determine the overall amount of home you can purchase and the likely mortgage payments. This knowledge makes it easier to find your home and determine how much you will need to put down.

Start by opening a dedicated savings account specifically for your home, and ideally, put a certain amount into it every time you get paid. Factor that amount into your monthly budget so that you don’t even consider using it.

You will also want to look at reducing debt, not only as a way to have more money to save, but also to improve your credit score. If you have high-interest credit card debt, try to get it combined onto a lower-interest card that you can pay off faster. Just be aware of any rate increases that could occur if you miss a payment or if the low rate expires after a certain period. The faster you pay off debt, the more money you can put toward your down payment.

You’ll also need to probably cut back on your spending. No, the occasional coffee or avocado toast isn’t going to be the ruin of you financially, but if you do tend to get an expensive coffee out every day and often go out for lunch or dinner, consider scaling back. It does all add up in the long run. Five dollars a day, Monday through Friday, can turn into $100 or more by the end of the month. Do you want that coffee or do you want a new home? Make your coffee at home and even invest in a thermos to take it with you if you usually take a coffee break. Similarly, look at your spending and see what can be cut or cut back on, such as streaming services and other monthly costs.

A major option to consider is moving to a more affordable apartment if possible. It may require living in closer quarters for a while, but if it’s doable and the savings are significant enough, it may be worth it, while you build up your down payment.

That’s an extreme measure, though. You should focus on finding mortgage lenders that have programs for first-time home buyers that cover all or part of your down payment. There are also grants and programs that will help if you take a homebuyer education course. Depending on your job, such as teacher or first responder, you may also qualify for certain assistance, so be sure to do your  research and examine all of your opportunities.

With perseverance, some cut backs, and a dedicated savings account specifically for your down payment, you could find yourself in one of the brand new homes in East Grand Forks ND. Contact us today to learn more about building your own home and we can put you in touch with some of our preferred lenders who also may be of help.

 

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This post was written by Crary Real Estate

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