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Eight Tips on Saving Up for Your First Home (Part 1)

The first time you take a really clear look at the housing market and calculate how much you’ll need to pay upfront to buy even your first home, the cost can be daunting. Down payments, processing fees and the continually rising cost of homes can look like an impossibly steep hill to climb, one with goal posts that seem to constantly move higher as you try to approach them. It’s all too easy for first-time home buyers to see the dream slipping away before they even have a fraction of the needed money saved up, and yet somehow new people are becoming homeowners every day. While it may be difficult, putting together enough savings and finding a home is within your reach. You just need to approach the situation with the right mindset and be prepared to make a few compromises on your first property.

1) It Won’t Happen All at Once

Just because you’ve started looking for a home doesn’t mean you’ll be buying this year or even next year. Saving up for a home takes most people several years, and often the housing market has changed significantly since they began saving. Your first step toward buying a house should be making a savings plan, not getting invested in how the housing market looks and the homes available today. Start saving now and be patient until you have enough saved up to actually consider a few available offers.

2) Start With a Price Range

The ability to fall in love with a home and imagine the rest of your life there is, unfortunately, not limited to properties you can realistically afford in the next several years. This means your first step should not be to choose a home but rather a practical price range. What is the minimum you expect to pay on a home you’d be happy living in? What is the maximum price of house you can put together a down payment for in the next five years? Now that you have your range, make sure to only consider homes priced within it or very close to your margins.

3) Save Into Multiple Purpose-Built Accounts

Having a single savings account is surprisingly challenging. It’s all too tempting to dip into it for things like special meals, yearly vacations and gifts for loved ones, and before you know it, you’ve set back your savings plan. Instead, open a special savings account just for your house fund and put a set amount into it each year that you don’t touch until it’s house time. You can also have a savings account for discretionary spending for things like repairs or special meals and maybe a third savings account for other big things you want like a vacation. This will not only make it easier to keep your money for its intended purposes, but also easier for many people to save up a lot without realizing it.

4) Be Prepared to Compromise

Most don’t get their dream house mansion by the sea as their first home. Consider your very first house as a starter, something to build up from as your life improves over time. To make sure you find a home you love even if it’s not ‘perfect,’ make a list of things you must have, things you’d like to have and things you’re willing to compromise on. Maybe you want a full-sized bathtub but could go without your ideal with hardwood floors. Being willing to do a little DIY on simple things like repainting and replacing an old fence may open up opportunities for houses that look shabby but are really quite nice and could be fixed up to sell at a profit later on.

Buying your first home is all about knowing what you really want and making all your plans point in the same direction. Of course, this is only the first half of our tips on how to save up for your first home. Join us next time for the second half of this two-part article where we’ll talk about careful selection, managing your lifestyle, credit scores and you.

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