According to Forbes, the average wage in the United States will be $59,428 per year in September 2023. If you make around this amount, you may feel as if your salary barely covers your living needs, much alone saving for a down payment on a property.
Saving for a house on an average wage is difficult, but it is not impossible. Even on an ordinary wage, your goal of homeownership may become a reality with determination and wise financial decisions. This is how.
Create a Budget
Setting clear, attainable goals is vital before embarking on your quest to save for a property. Determine how much you require for a down payment and set a timetable for achieving this objective. This will provide you a clear plan as well as encouragement to keep on track.
Keep accurate records of your monthly income and spending, and find places where you may save money. Set up a percentage of your salary for a down payment fund.
Remove Unnecessary Expenses
“Slash spending if you want to save for a house on an average salary,” said David Bakke, a housing consultant at DollarSanity. “That means cutting grocery costs, looking for ways to save on other monthly bills, and limiting personal purchases.” It is possible if you have the will to achieve it.”
While you may not have control over your pay, you do have power over your spending habits. Examine your monthly costs and discover places where you may cut back. This may entail canceling subscriptions, dining out less, or looking for more cost-effective alternatives to your typical purchases. These tiny sacrifices can quickly pile up and drastically increase your savings rate.
Read Also: 7 Grocery Savings Strategies in 2023
Suspend Your Retirement Savings for a While
“You can also reduce your retirement savings, though this is a touchy subject,” Bakke added. “If you do decide to go this route, make sure that you can get back on track with your retirement savings as soon as you’ve purchased your home.”
Even if you continue to contribute to your retirement account, saving for a home should be a top priority in your budget. Set up automatic payments to your dedicated housing fund each month, just like you would for any other important cost, such as rent or utilities. This method assures that you continually contribute to your housing fund while avoiding the temptation to spend that money elsewhere.
Any unanticipated financial windfalls, such as tax refunds, work bonuses, or presents, should be deposited directly into your down payment fund. It’s tempting to spend these unexpected sums of money straight away, but putting them aside for your housing fund will make a significant impact. These extra cash injections can significantly enhance your savings and help you reach your homeownership goal faster.
Consider Getting a Roommate
If you’re open to the concept, having a roommate can considerably lower your monthly living costs. The additional money you save by dividing rent and utilities might go toward your savings goal.
Sharing expenses with a roommate may be both beneficial and hard. It has the potential to establish connections, create memorable experiences, and serve as a support system. However, it also necessitates compromise and communication skills, which will come in handy if you finally buy a property with a spouse or partner. It may necessitate some adaptations, but it is a wise method to move closer to your ambition of purchasing a home.
Consider an FHA Loan
FHA loans, or Federal Housing Administration loans, are government-backed mortgage programs meant to make homeownership more accessible to people who may not have a lot of funds or a perfect credit history. These loans are well-known for their ease of use, allowing borrowers to obtain a property with a lesser down payment than is often required – as little as 3.5% of the purchase price.
With FHA endorsement, lenders have more confidence, making it simpler for customers to qualify for a mortgage. While FHA loans provide a path to homeownership for a larger range of people, they are subject to certain restrictions, criteria, and prices, and prospective borrowers should carefully study the facts before pursuing this option. Work with a knowledgeable real estate agent to identify the best house and loan combination for you and to negotiate favorable conditions.