The rising cost of rent has affected everyone, and if you want to own a home someday, you may find it is nearly impossible to save enough for that down payment. But before you become resigned to the idea of renting for the rest of your life, you should know there are some steps you can be taking to make homeownership come sooner than you expect, even if those are small steps at first.
Table of Contents
Reduce Spending and Increase Income
You will likely need to find some area of your budget where you can cut spending. You might decide not to buy any new clothes or to go on any more vacations while you save for your home. If you splurge in one area now, consider putting a temporary hold on this area and know that it is only for a short while. One area you may consider reducing spending is your student loans.
Refinancing can often save you money, and you may not even need a cosigner. You can look at a guide with information on how to refinance your loans without a cosigner so you can learn what to do to get approved for this. Increasing your income can also give you a greater level of savings each month. This also helps your budget trims to feel even more effective. Start by seeing if you can get a raise or promotion at your current job, especially if you have your annual performance review coming up. A side hustle can also be a good option if you are currently unable to get a promotion, raise, or new job.
Rase Your Credit Score
Trying to build credit when you don’t have any is tough but not impossible. It’s important because lenders often determine whether you can get a mortgage by running checks on your credit score. If you have a high credit score, you may not have to pay as much in interest, making the mortgage much more affordable.
If you don’t have a great credit history, you will pose a greater risk to the lender, even if you meet the minimum requirements. Of course, you should not spend years focusing on only your credit score when other factors go into play as well. Just make sure you are paying your bills and not taking on more debt than you can handle. Using an automatic bill pay service means you are much less likely to forget an important payment that can impact your score.
Reduce Retirement Savings for Now
Buying your first house is a huge investment, and it can help you build wealth, directly benefiting you in retirement. Many homeowners’ net worth’s are significantly higher than renters’, and this is often due to the equity of a home. That means that if you must choose between the two, a home is often a better investment than a 401(k) account. However, if your employer offers free matching, you should take full advantage of that, so you are not leaving free money. After you have bought a home, you can go back to your full 401(k) contributions.
Whether she is researching the latest trends in home decor, life-changing destination getaways, or the best way to maintain your finances, Dewey takes pride in leaving no stone unturned. She is passionate about distilling and delivering high-quality information that you can use to upgrade your life.