Buying a home is a dream for many American families, but many obstacles stand in the way. Primarily, the main obstacle you will face is the cost.
Homes are very expensive investments, and even in less competitive markets, you can expect to pay hundreds of thousands of dollars for a decent-sized home.
Those kinds of price points can be very intimidating. How are you going to afford the monthly mortgage payments, utility bills, insurance, taxes, and repair costs on top of all your other life expenses?
It may not be easy, but if you have the income, it is entirely doable. Although younger generations are waiting longer than ever to buy homes, instead favoring the rental market, investing in a home can be one of the best decisions you will make in life.
If the cost of homeownership is concerning, then here are a few tips to help you manage those expenses.
Start Saving for a Down Payment
When you buy your first home, you probably plan to take out a home loan to do so. When you buy that house, you will be required to put some money down upfront as a demonstration to the lender that you can afford to pay back this loan.
However, the smaller the down payment you cover upfront, the higher your monthly costs will be. This is because you will have a higher remaining balance to pay, but it is also because your interest rate will be higher.
If you save enough to cover a 20% down payment on a conventional loan, then you can avoid extra costs like mortgage insurance. In many cases, 20% may be the minimum requirement, especially for a jumbo loan down payment. Start saving now so that you have a solid down payment years down the road for a home.
Beef Up That Credit Score
Your credit history becomes immensely important when taking out home loans. A strong credit score will grant you more borrowing options as well as a competitive interest rate to keep your monthly payments low. How can you improve your credit score before beginning the hunt for a home?
Make sure you pay all your debt payments on time, such as credit cards and student loans. Ask to be added as an authorized user on the credit card of someone who has a great credit score already. Increase your credit limit without changing your spending habits to lower the revolving utilization percentage on credit cards.
These practices can help you improve your credit score to get more favorable terms on your home loan.
Study Basic Home Repair Skills
One of the extra costs of owning a home is ongoing maintenance and repairs. Research estimates that you may spend 1% of the cost of the home each year on maintenance or repairs. On a $300,000 home, that means $3,000 each year on average. Some of those costs could be mitigated by handling repairs yourself rather than paying contractors.
If you have the knowledge and tools for basic home repairs, you could cut down on maintenance costs for labor and you will only need to pay for the materials themselves. However, more complex jobs should be done right, so sometimes calling a professional is the wisest decision in terms of your finances because doing the job incorrectly would be far more costly.
Implement Energy-Efficient Practices
Utilities are a big expense for homeowners. Heating and cooling in particular are necessary to maintain a comfortable environment for the whole family. You could be wasting hundreds of dollars each year on utilities if your home is not energy efficient. A smart thermostat will make it easier to cut down on wasteful heating and air conditioning patterns. Energy start appliances will reduce the usage of water and electricity in your home. LED light bulbs consume less power to stay lit and last longer so you will not have to buy as many replacements. Using darker shades in the summer can reduce the amount of heat entering the home during the day, preserving your A/C units. If you make your home more energy efficient, the total cost of ownership decreases because of lower utility bills.
Know the Tricks to Reduce the Cost of Homeownership
If owning a home is a dream for your family, then you should do whatever it takes to provide that for yourselves. It might take a while to save up money for a down payment or build up your credit to access a lower interest rate, but the benefits of owning a home will be worth the effort.
Additionally, once you move into the home, you can cut costs by doing basic repairs yourself and turning the home into an energy-efficient property.
Start making changes to your lifestyle now to save up for this big investment that will benefit your family for years to come.