Saving up enough money to buy a house might seem like an impossible task in the current economic climate, but there are a number of ways to make your goal more attainable. Millions of new homeowners move into their very own properties each year proving that it can be done with a little hard work, budgeting and organization. To get your foot on the property ladder, you must focus on two main objectives which are saving up enough money for a down payment and securing finance from a bank or building society. As long as you have a reasonably good credit score and can afford to put aside a little money every month, you could soon be holding the keys to your very first property.
Fix Your Credit Score
In order to secure the best mortgage rate, you will need to show lenders that you are a responsible borrower. Before you even think about searching for a house, you will need to obtain a copy of your credit report. According to uSwitch, more than one in three credit reports contain errors that could get the owner turned down for a mortgage through no fault of their own. Once you have your credit report, check it carefully for errors or any black marks. If you have a low credit score due to past financial difficulties, it may be worth waiting a few years and trying to build it up by taking out a credit card or small loan. Getting turned down for a mortgage can reduce your credit score even further, so never apply for credit unless you are absolutely sure you will be approved.
Sit down and make a list of all your monthly outgoings such as rent, utilities, food, and travel expenses. Look for ways to reduce your outgoings such as cycling to work, avoiding brand name foods or shopping at second-hand stores. Rent is often the most expensive outgoing and can take up a huge chunk of your salary. Consider moving to a less expensive home while you save money for a down payment, or you could even think about a flat share. Any extra money you have left over after living expenses should be transferred directly into a savings account.
Create Multiple Streams of Income
Unless you have a fair amount of disposable income left over after expenses, it can be difficult to put away enough money each month to achieve your goal within a reasonable timeframe. Therefore, you will need to think about other ways to top up your savings. Birthdays, weddings and graduations can all be highly profitable occasions, and you could even approach other family members for help with your down payment. A part time job is a great way to add another revenue stream or you could sell some of your unwanted items on eBay. If you have a hobby such as crocheting or jewellery making, consider selling your creations online or at local craft markets.
Buy What You Can Afford
Once you have your down payment and are ready to begin searching for a home, make sure you are aware of exactly what you can afford. You can search fulfords.co.uk for an idea of what type of houses are available within your price range. Although it may be tempting to take out a larger mortgage in order to purchase a house with extra bedrooms or a second garage, you will regret it later when you are struggling with mortgage payments. Even if you are approved for a larger amount than you requested, you should always stick to your original plan to ensure you don’t accumulate more debt than necessary. Having a down payment of at least 20% of the entire value of your chosen house will help you secure the lowest mortgage rates on the market. Although there are some lenders that will let you take out a mortgage with only a 5% down payment, these loans are often very risky, and you could see your mortgage payments double or even triple after an initial fixed period.
When saving for your down payment, it is important to also budget for administration costs and any unexpected expenses that may crop up. Estate agent commissions, lawyers’ fees and home inspections can be surprisingly expensive, but are all part and parcel of the home buying process. An experienced estate agent can guide you through the complicated process of real estate purchase and help you find the perfect house to start building your equity.
Molly Howarth works in consumer finance and also likes to blog regularly with tips and ideas for making your finances work. She writes regularly for a number of consumer lifestyle websites.