Buying a home is more expensive than ever. However, you needn’t have to spend twenty years saving up for a down payment. There are many speedy ways to get onto the property ladder for those that are determined. Here are a few tips for quickly and affordably buying your first home.
Get serious about saving for a down payment
The more you can save up each month, the more quickly you’ll afford a down payment.
Of course, setting aside large amounts of money each month is easier said than done. Unless you’re lucky enough to already have lots of disposable income, you’ll likely either have to a) cut back on your existing spending each month or b) find new ways to earn money each month.
Not everyone is prepared to make big sacrifices or work overtime for two years just to afford a home. However, it’s this serious mindset that is often necessary if you want to save up for a home fast. Remember that any sacrifices you make or any extra work you have to put in will be temporary until you’ve got that down payment.
Find creative ways to grow your savings
Finding ways to grow your savings will help you to save up money faster. Putting your money into a high interest savings account is one way to do this - as you add to your savings, you’ll gradually earn more money through interest. Check out different ways that you can invest to make a small sum into a large sum. One site you can look at for easy to read tips is https://www.sofi.com/invest/.
Alternatively, you could try investing your money elsewhere. For instance, you could try investing in Bitcoin or stocks and shares with your savings to try and improve their growth. This is definitely riskier than putting your money in a savings account, but the potential for making a return is much greater. If you try Bitcoin profit you may see a large increase but you have to sell it while the value is high.
Plan to joint buy a home
Buying a home with somebody else allows you to both split the cost of the down payment, allowing you to save up money more quickly. This person could be a partner, a family member or even a close friend.
Joint ownership could allow you to also split the bills making it a more affordable option in the long run. Just bear in mind that if you’re both going to be joint owners, you’ll both need to have a good credit score and be in a good financial state when you come to buy. You should also consider what will happen if you sell the property (if you’re friends or siblings, you may not want to live together forever, which could mean splitting the money when you sell).
Look for low down payment mortgages
The average down payment is 20% - however there are many mortgages out there that require down payments that are much less than this. Some can be as low as 5% or even 2%. There are even loans with special eligibility requirements that require no down payment at all such as VA home loans. A low down payment could make it much easier to save up the necessary money more quickly.
Low down payment mortgages can have their cons. Many no down payment mortgages are only available to specific buyers such as veterans or people buying rural property. Others may come with large monthly payments and high interest rates, which could make your home very expensive in the long run. In other cases, a very high credit score may be necessary.
Quickly boost your credit score
When it comes to low down payment mortgages that require a high credit score, you may want to look into ways of quickly boosting your credit score if it is currently low or fair.
Start by considering credit cards that you may be using. If your credit cards are maxed out or near their limit, consider making your mission to pay some of these debts off. While credit card usage can be good for your credit score, you ideally don’t want to be regularly borrowing more than 30% of your limit if you want to keep a high credit score.
There are also credit builder schemes that you can use such as credit builder loans. These can be useful for quickly boosting a low credit score within a year. Just make sure that you successfully pay off this loan each month.
Look into first-time buyer assistance programs
Some states have their own first-time buyer assistance programs, which can help first time buyers to more easily afford a down payment. This could include state loans with low down payments or state grants that may go towards your down payment.
Requirements for these assistance programs vary by state. You may be restricted to buying homes of a maximum purchase price in approved locations. In other cases, you may have to earn under a certain income. There may even be a requirement that you take a home buyer education course. You can research into individual state first-time buyer assistance programs here.
Know where to look for cheap property
A more expensive property means a more expensive down payment. If you want to save up for a down payment more quickly, you ideally want to stick to cheaper properties. But just where can you find these properties?
Size and location are the two big factors that can affect cost. Your flexibility is likely to depend on what commitments you have. A one bed apartment could be all you need if you’re single or a couple with no plans to start a family in the near future. If you don’t have to be based in a certain location to do your job or take kids to school, consider whether you’d be prepared to relocate to a cheaper area. Moving to another town or even another state could allow you access to much cheaper property - the average home in West Virginia is three times cheaper than the average home in Massachusetts.
Don’t make too many sacrifices simply for the sake of affording your first home. While you can save money by moving into a dilapidated home next to an airport, you should consider whether this is somewhere you’re really willing to live. Such unattractive properties may also not gain much value and may even depreciate over time - this could make it a struggle to eventually sell them and you’ll end up on a loss.
A quick summary
By adopting as many of the above methods as possible, you could find yourself owner of a property in much less time. It all depends on what sacrifices and changes you’re willing to make to get on the property ladder fast.
Let’s imagine you have your eyes on a $200k home. A 20% down payment on this home would ordinarily require you to save up $40k. Polish up your credit score and shop for low mortgages/state incentives and you may only have to put down 5% - which is $10k. Plan to joint buy a property and you may be able to split the cost - potentially allowing you to save up $5k each. Find creative ways to grow your savings and you may only have to save up $4.75k each. That’s less than $100 per month over four years.
When you start to picture buying a home like this, it becomes much more achievable. Of course, it all depends on your circumstances and what you’re willing to do to get on the ladder. Not everyone will know someone that they can joint buy a property with and not everyone will be able to access $200k homes in their area - trying to buy a property solo in New York for instance is going to be a lot harder.
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