Buying your first home is a big challenge, as it takes a lot of money and this can be overwhelming. That’s why we want to share with you a few simple steps to help you achieve your goal.
1. Make up your mind once and for all
Although this step seems very obvious it is decisive. Have you really made up your mind, that is, have you already got a plan to achieve it? If you don’t have your goal written down in a notebook, an Excel or an app, then it’s not a goal, it’s just an idea. On the other hand, if you have your goal written down, it will be easier for you to define what you must do to achieve it.
So get to work, establish how much money you need, when and how you will get it together, in the following steps.
2. Know your financial situation
Many times we think that we don’t have enough money, that it is impossible to save large amounts of money; however, the truth is that sometimes we spend on unnecessary things or we don’t even know how much money is really left over, which prevents us from achieving our goals.
Then, it will be necessary to make a statement of financial situation. In it you will have to put all your income, savings, investments, income or assets that you can turn into cash (jewelry, collectibles, merchandise, etc.). Also, you must record all your expenses, debts or other obligations.
The idea is to see how much money you have available after subtracting expenses and debts. This way you will know if you are ready to ask for a credit, or if you need to make adjustments. Maybe you need to earn more, spend less, or look for cheaper options that don’t affect your personal finances.
You can use this budget calculator to make it easier for you to know your potential savings and how much you need to spend on everyday expenses.
3. Define your budget
Once you know your financial situation, now you will see how the external situation is, investigate in some real estate agency how much the house you would like to buy costs, how much the credits cost, how much you need of down payment, among other expenses.
It is very important that you know the exact amount you should save, but you should also add an extra amount for any unforeseen event. According to the survey, “Beyond the Bricks”, 54% of the young people who bought a home in the last two years paid more than they had planned.
4. Track your savings
Once you have defined how much you need to save and in how long you are going to achieve it, it is time to follow up. Establish when, how much you are going to save and where you are going to keep them.
For example, let’s say you are going to buy a house worth a thousand dollars, make a 20% down payment, and pay a 15-year loan with a Total Annual Cost of 12%; the down payment will be $281,303.00.
If in two years you want to save for the down payment, you will have to save $380 daily, $2,679 weekly, $5,741 biweekly or $11,712 monthly, for two years. This amount may decrease over time if you keep your money in an investment account that generates returns.
As you can see, these are smaller, more realistic amounts that you can adjust according to your financial situation.