Tips to Save Money for Your Future

Home ownership can seem beyond your reach, especially if your finances are in less-than-stellar condition. It may take a little longer than you might like, but home ownership is still possible. You have to start by following some basic steps so that you can save up to purchase a home.

Purchasing a home generally requires a mortgage, and to be approved for a mortgage, your credit score has to meet the lender’s criteria. Applicants with great credit scores often can qualify with a small down payment, while applicants with mediocre (or worse) credit scores will need a higher down payment.

Find out what your credit score is and take appropriate steps to improve your score. Pay your bills on time, lower your credit utilization rates and keep existing credit lines open. A one-point difference in your score can literally cost you thousands of dollars in increased fees and higher loan rates; if your score is too low, you may not qualify for a mortgage at all.

Many lenders have a loan pre-qualification process. You complete an application with a lender, and they let you know how much of a loan you should be able to qualify for. The difference between the loan you qualify for and your purchase price will be the amount you need as a down payment.

Some individuals have the financial strength to keep all of the savings in a single account, while other individuals tend to spend the money as they see it. If you fall into the latter group, consider opening up a separate account specifically to save up for your down payment. Designate a set amount from every paycheck to go into this account, with the understanding that the money in this account is only to be used to obtain a home.

If, like most people, you tend to spend more in stores when you are using a credit card as your payment form, then put your cards away. Do not close out the cards, as that may adversely affect your credit score. Just put them in a drawer at home, don’t use them, and pay off any balances you are carrying. This will improve your credit utilization scores and also reduce fees associated with using credit cards.

If you have not already created a budget (or a spending plan), then it is past time to do so. Track your expenses and see what luxuries you can cut out. If you have outstanding loans, such as student or automobile, continue to pay them regularly.

If your income is just covering your expenses, and you have eliminated unnecessary spending, then you might consider getting a part-time job to increase your income, and then direct this additional income into your savings account. Saving up a down payment is possible, but it does require you to be diligent in your spending and saving habits.