Anyone with any financial sense knows that buying a home is the single biggest financial purchase you will ever make. And though your first home may not be the most expensive one you ever one, it is certainly the most important. Making the transition from renting to owning requires sound financial footing, a solid plan, and more than a little determination.
The most important part, of course, is having your financial ducks in a row. Ideally, this means saving enough cash to make a decent down payment and earnest money, which will ease the minds of both lenders and sellers.
The idea of saving money is nothing new - most six year olds have a piggy bank, for crying out loud - but when the needs and expenses of adulthood kick in it can become difficult to set aside money each month.
We found some helpful resources for getting to that magic number needed to purchase a house. It differs for everyone, depending on their location, their income, and the type of house they're looking to buy. But learning to save is always a valuable lesson.
A 2014 article from Lifehacker has a whole slew of strategies, from planning your purchase to investing your savings. The most practical bit is to shoot for the 20 percent mark - that is, paying 20 percent of the price of your home in cash. So if you're planning to spend $100,000 on a home, you'll need $20,000 in cash up front.
From the article:
Once you've found a realistic price range, make a down payment goal. As we've said before,follow the 20% rule. Twenty percent has long been the norm for a home down payment. Before the housing market downturn, people went for 10% because they were being approved for full-price loans. We all know how that turned out.
Once again, lenders are trumpeting loans of up to 100 percent financing. Avoid that situation if you can.
Another good tip from the same article: first-time homebuyers are allowed to tap into their IRAs penalty-free, up to $10,000. Though you may be loathe to use that money while you're young, the savings on not financing that $10,000 should more than make up for the slice you take now.
A helpful graph:
Take a critical look at all of your expenditures -- gym memberships, vacations, entertainment -- to see where you can cut back to meet your savings goal. While you don't want to drain all the enjoyment out of your life, you can keep spending in check without sacrificing much. For example, if you like to go to restaurants with friends, Murray says, limit your meals out to one a week, and invite friends over for potlucks instead.
