Many would-be homebuyers face a catch-22: They are paying more for rent than they could be spending to own their own home, yet they are unable to save up for a down payment and closing costs to buy a house because they are paying too much in rent each month. According to RentJungle.com, the current average rent for a 2-bedroom in the Manchester, NH, area is $1,450. If you were to purchase a 3-bedroom house for $285,000 in Manchester at 4% interest, your monthly mortgage could be $1,361. That’s nearly $100 a month less than the 2-bedroom rental!
Imagine a beautiful, new construction home that’s all yours on a nice plot of land in a great neighborhood. There also are tax benefits to being a homeowner; you’ll likely be able to write off the interest on your mortgage. And while the cost of rent is expected to continue increasing, your monthly mortgage payments could remain the same for the entire 30 years.
So how can renters afford to keep a roof over their heads and still save to buy a home? Here are a few ideas to help you do just that.
Tighten your purse strings
The first strategy to consider is almost mandatory. Think about the things you spend money on every month that you could do without. A gym membership? Regular shopping trips for clothes? Cable television? Maybe you can scale back your mobile phone plan. Or get new quotes for car insurance. Try to eat more at home versus going out. Your grocery list is another place to trim. Use coupons when you can and buy less expensive brands of the items on your list. All the dollars saved from these monthly expenses add up over the course of a year.
Work to live
Sometimes it seems there is already not enough time in the day or week, but if you’re in a position to do so, think about picking up another job. Even temporarily, the extra income can make a significant difference in the amount of money you can save over a short time.
Set aside any “windfall”
When you get a tax refund, hold onto it. If you get a raise, resist the urge to spend it every paycheck. Continue to live on your previous salary, and make sure the difference is deposited into an account you don’t touch.
Pay down debt
As you work hard to sock away money for a down payment on a house, it might be best to pay off your bills instead. If you have credit card debt, aim to eliminate it. There are several advantages to doing so: You’ll improve your credit score for a mortgage approval, and you’ll pay less interest over time, which results in savings. Once you have fewer bills to pay per month, use the new “found money” in your budget to build up to your down payment savings goal.
Saving up isn’t easy, but continue to look for those opportunities to put more money in the bank. Have a yard sale or sell some bigger, more valuable personal items you can part with online. If you have the space in your current rental house or apartment, a roommate can help pay the bills.
When you’re financially ready, you’ll be more confident when it come to househunting. Want to see all that you could have in a new construction home? Schedule a tour in our of our communities today!