Saving money for a down payment can be a rather daunting task most homeowners have to struggle with. Making a 20% down payment translates into two-thirds of the average income of a household.
This is a task that takes the average person the course of several years, and if you are renter, then it takes more. Even though you can get conforming loans when you can’t meet the minimum for a down payment, the truth of the matter is that, the more money you put on your down payment, the lower your mortgage payment is going to be. You want to be sure that you do not make any of the costly mistakes that homeowners can make when you are already struggling to save for a down payment.
To make matters worse, you also have to save money for the closing costs and it is always a good idea to save some cash for any sudden repairs/renovations that come with becoming a homeowner.
Factors That You Can’t Save Money
Now, if you can’t seem to save enough money for your down payment, there are a number of factors that have a major influence in this. Let’s talk about the most common reasons why you may be struggling, and what you can do to rectify the situation.
- Not having a Budget.
This is one of the most common reasons why some people find saving money so difficult. As it was mentioned raising the money for a down payment is a daunting task and some people don’t realize their expenses are out of control and that leads them to nowhere.
If you want to buy a home, then you are going to have to make a tight budget for yourself. The best way to start is to write down on a spreadsheet your net income after taxes, then, sum up your monthly debts like rent, car payments, credit card bills, and utility bills.
Whatever you have left, is what you are going to be working with to cover the rest of your expenses. If you are having too much take out, then you may want to cut down on that. If you are buying more food than you are eating, then you need to revise your grocery shopping list. Figure out where you can cut costs and save money.
- Having a bad credit.
Some people are incredible reckless when it comes to their credit scores. Making late payments, missing payments entirely, letting debts accumulate on top of each other, all affect one’s credit scores and it can be a real mess. By the time people realize how much trouble they are in, it can be a bit late.
Lenders consider credit score to be the most essential aspect they consider when approving a mortgage loan.
If you are struggling to save money for your down payment and you are planning on getting a loan to help you, then consider improving your credit score. You will have to make choices that involves making payments on time, not overspending and making sure to not miss any payments. If you have a bad score, it will take a while to get a better score, but as long as you stay consistent, your credit score will start to go up.