Budgets and Money

Saving for Your First Home

Preparing to buy your first home is more than picking floorplans and community amenities. Before you fill your first moving box, get your financial house in order with these tips.

How to Budget Money when Buying Your First Home

Home ownership is a vital part of the American dream, and if you've never had the pleasure of home ownership, you're probably particularly hungry for it. If you've been thinking about purchasing your first home for a while, but you're not certain how soon it'll be a viable option for you, we have a few tips to help get your financial house in order. First...

Reevaluate your household budget.

We talk a lot about budgeting here in the Protective Learning Center. If you haven't already started creating a budget, now's the time to do so. (Need help? Visit our Learning Center and check out recommendations for the best free budget tools online here.)

Once you've formulated your budget, it's time to...

Calculate what you can comfortably afford.

Many financial advisers recommend that you allocate no more than a 25% of your pre-tax monthly income towards mortgage payments. 20% is even safer. Your total debt (including mortgage payments) should take up no more than 36%.

Using the math above, find out what your ideal mortgage payment would be, and then add in your present debt. If that number exceeds 36% of your monthly pre-tax income, then it's time to...

Eliminate excess debt.

Your two biggest assets in getting approved for a home loan are your down payment and your credit history. Order a copy of your credit report and take care of any overdue accounts or delinquencies as soon as possible, as they will weigh heavily against you in the home loan approval process. Once you've done that, it's finally time to...

Save up.

Here are some ideas to help you save up as much as possible, as quickly as possible.

  • Liquidate your assets.

    Do you have a 2nd or 3rd vehicle you never use? Or a storage unit full of stuff you've mostly forgotten about? Convert your assets to cash, and give your savings a nice boost.

  • Start “paying” your mortgage early.

    Since you've already calculated your ideal mortgage payment, see if it's feasible to set aside a mortgage-payment sized amount every month.

  • Bank those big checks.

    If you get a big tax return or a bonus at the end of the year, bank it towards a new home purchase. It's always tempting to splurge, but bulking up your down payment can help you realize your dream of home ownership a lot faster.

  • Cut back on student loan payments, if possible.

    Student loan reform has done a lot for your pocketbook, whether you know it or not, especially if your loans are federal. Phone your student loan provider and ask about getting on an income-based repayment plan (IBR).

  • Safeguard yourself from yourself - auto-deduct!

    If it's hard for you to save, talk to your payroll department about sending a certain portion of your income to your savings account automatically whenever you get paid. If it's really hard for you to save, set up a savings account (and only a savings account) with a bank you don't currently bank with, that way the money is never immediately at your disposal.

If you still have questions about whether home ownership is currently the right choice for you, we have even more tips to help you decide whether to rent or buy.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Companies and organizations linked from Learning Center articles have no affiliation with Protective Life or its subsidiaries.

How to Budget Money

Learning how to budget money for your first home sets you on a course that will get you there that much sooner. If you're looking to save as much as possible to realize your dream of home ownership, these tips for how to budget money may help you better identify where you can begin to save the most. For more information, visit our learning center.

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