Piggy backing on the most recent post, I would like to discuss with you the first step to buying, when you do decide that the time is right for you. If you are like most people, you won't have 10-20% of the price of a home sitting in cash in your savings account, especially when you are a first time home buyer without any substantial equity. So, how do you do it? Of course with an FHA loan, it is possible to only put 3.5% down, but that means that your monthly mortgage payment is substantially higher. In an ideal situation, you have enough saved in order to be able to put 20% down, and then your mortgage payments with a 30-year fixed loan are manageable.
Sounds great, right? It's certainly easier said than done. So, how do you do it? ZillowBlog has some clear steps and here they are:
1. Figure out how much you need to save
Many websites have calculators that will allow you to figure out how to achieve your ideal monthly payments, how much you need down, what the interest rate would be, and how the money would be broken down. Using a calculator like that, or talking to a finance agent who can walk you through your situation.
2. Seek Expert Advice
Especially if you have a poor credit history, or have had problems in the past with credit or spending problems, seeking the advice of a financial planner is highly recommended.
3. Set up a separate savings account
It's far too easy, with the advent of online banking, to transfer funds from a savings account to a checking account when they are linked. Setting up a separate savings account that you can transfer money into, but not out of easily, you won't spend it as much.
4. Set up an allotment or automatic transfer from one account to the other monthly
When the amount going into your account, even when you spend down to zero, is less then you will spend less. When the money is out of sight, it is out of mind.
Good luck savers!