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New Year, New Home: How to Save for a Home this Year

New Year, New Home: How to Save for a Home this Year

Have you been dreaming of owning your own home or even upgrading the one you currently have? 2021 could be the year that you are finally able to purchase a new home!  With a few simple steps and a little saving, you could be well on your way to move-in day. If home ownership is on your to-do list in 2021, follow these simple steps to save in the new year.


Track spending and make a budget

Prior to even looking at homes, decide what amount you can comfortably afford. January is a good time to not only track all of your monthly spendings and create a budget of your expenses but to take a look at your spending habits from the previous year. Once you’ve taken a look at all your expenses, you’ll have a more complete picture of how much money you truly have at the end of the month and what you can do to increase your savings.


When you go to get pre-approved, keep in mind what the bank may say you can afford might be drastically different from what you can actually afford and maintain the lifestyle you want. Calculate your total home costs, including mortgage, property taxes, and home insurance, which can often add several hundred dollars to your total mortgage. A good agent can help you determine general numbers to start.  


Save for a down payment

Having a low debt to income ratio will be beneficial when saving for a downpayment and getting a mortgage.  Your savings are another aspect of your financial picture that lenders will be very interested in. But you don’t only want to build up your savings to impress lenders. You’ll want to save money for a down payment on your new home. Its also important to note that you will need to have cash on hand for closing costs. 


Finally, nearly every homeowner would agree that you will want to have money saved up for things like home décor, maintenance, and renovations. Start saving early in the year to put yourself in the best position possible to afford the home you want—and the things you want to put in it!


Check if you qualify for housing programs

Before you purchase a home you will want to see if you qualify for any housing programs.  If this is your first home, you can qualify for a first-time homeowners loan. These loans have a lower down payment requirements and are easier to qualify for than a conventional loan. FHA loans are excellent for first-time homebuyers because, in addition to lower upfront loan costs and less stringent credit requirements, you can make a down payment as low as 3.5%


If you are not a first-time homebuyer, you still might qualify for a loan that can help you save.  Military service members and veterans can get a Department of Veterans Affairs loan that doesn’t require a down payment or mortgage insurance, and comes with low closing costs.  There are also other loans available for teachers, police officers and firefighters through the Good Neighbor Next Door Program.  Check out this link for more information!


Improve your credit score

Your credit score is a significant factor that lenders use to determine your eligibility to buy a home. The better your credit score, the better your chances will be to secure a home loan. Some ways to improve your credit score are to pay off any credit card bills, refinance student loans and refrain from opening up any new accounts.  


2021 could be the year that you are finally purchasing a new home! With these few simple steps, you will be well on your way to the closing table.  If you need help finding your next home, a real estate professional at Berkshire Hathaway HomeServices The Preferred Realty is here to assist you. We even offer an agent compatibility test to help you find your perfect match!