Investing in real estate is not just something for the rich. Even with a smaller down payment anyone can participate in the real estate game and be on the road to obtaining the American dream.
First, you will need to determine how much you will need for a down payment before you even create a plan. If you intend on purchasing an investment property that you won’t be living in, plan on at least 20%. If you are purchasing something that you are going to live in, then you can get away with much lower so long as you have good credit. This can even be as little as 3.5%. Just be aware that if you put less than 20% down, you will be required to pay private mortgage insurance or “PMI.”
Here are some helpful tips to follow as you create your savings plan.
Establish a Budget
The first thing to do is to identify how much you will need. See the above mentioned percentage guidelines for which applies to you. Contacting a mortgage broker earlier on is also a good idea as they can furnish you with the latest rates and loan programs as well as get you prequalified based on your credit.
Limit Your Expenses
Review your bank statement and monthly expenses. You may be surprised to see how many things that you pay for regularly that you could eliminate. Can you trim down your cable TV bill to a lower package? Do you pay for satellite radio in your car? Trimming these monthly expenses can really add up into sizable savings each month and over time.
Sell Unnecessary Items
After you have cut some expenses, now look at the things you physically have and decide if you absolutely need them. How many things are simply wants versus needs? You might have some jewelry, watches, electronics or even appliances around your home now that you could sell for extra cash towards your down payment.
Put Aside Bonus Money
Anytime you earn extra money that you hadn’t planned on, put it into your savings account. This includes things like tax returns, work bonuses, holiday gifts from family or friends or the like.
This is easier for some than others to do. Might you have the opportunity at work to take on some overtime? Do you have enough free time for a part time job? Could you even enroll in a paid study? All of these ideas can also help you reach your financial goals.
In the end, just be patient. Buying a home is a large commitment and you will certainly want to be financially comfortable when you make the plunge.