Picture this: You've found the home of your dreams, you've made an offer and it's been accepted. You're excited to finally move out of your small apartment and into a nice home with a yard.
But that happiness subsides when you realize there's a few thousand dollars of closing costs, inspections and escrows to pay out-of-pocket. You don't have a dime in savings. Not a good place to be, is it?
If you want to be prepared for this major purchase it's a good idea to start saving while you're still renting. The VA home loan is a $0 down program, but it doesn't mean there aren't costs involved in the homebuying process.
What are the costs that you have to be prepared for before homeownership?
First, let's talk about some of the costs you should start saving for:
So how do you save for these costs when you're paying rent? There is no magic solution here. It will take hard work, dedication and time.
1. Know where your money is going each month.
Whether you have a budget or just pay bills as they come due, it's really important to know where your money is going each month. This helps you to better identify areas where you can make cuts. Consider writing down every transaction over the course of a month and highlight areas where you can cut spending. Then create a budget and make an effort to reduce spending in these areas. This will allow you to put the money saved into a specialized home savings account.
2. Automatic Transfers
If you've already established how much you'd like to contribute to your home savings each month consider setting up an automatic transfer. Look into setting this up with your payroll department or bank. By having a certain dollar amount or percentage of your paycheck automatically transferred to a home savings account you can ensure that you don't get sidetracked by "wants" before you get around to saving.
3. Additional Income
Consider taking on a temporary part-time, seasonal or side job to supplement your current income. Alternatively, consider harnessing your talents to offer a service or goods that you can sell online or locally. Any way you can find to supplement your income on a short term basis can help you save. Just make sure that you use your willpower and save that hard earned money instead of spending it.
By planning and saving now, you can avoid stress and make your eventual homebuying process a smooth one.