Readers Digest
Magazine subscription Podcast
HomeMoneyProperty
Save for your home from your salary

Save for your home from your salary

BY Promoted Content

2nd Mar 2023 Property

A lot of salaried people interested in owning a house are often convinced that they will never be able to afford it. If you are one of them, you are not alone. A lot of people dream of owning a home and it is one of the biggest investments they’d make in their life.
However, they also believe that it may never be possible for them to buy a home with their salary. House affordability is harder for first-time homeowners and navigating through the market challenges can be difficult.
But persistence and patience can certainly pay off. Even if it is a seller’s market, you will find opportunities where the seller wants to exit a property right away and is looking for a reasonable offer. You must also remember that a 20 percent down payment is not a mandatory requirement, and you can find lenders that offer a mortgage even with a down payment as low as 5%.
Hence, there is hope you can find a house you love and afford it someday, even if you think that your current salary is not where you want it. In this article, we help you leverage your resources and offer the right tips to help save for the house on your salary.

1. Work on your credit score

It is possible to get a mortgage with bad credit, but you will end up paying a higher interest rate as compared to someone who gets a mortgage with excellent credit. Even if there is a difference of 1 percent, it will add up. The lender will determine your rate of interest based on the credit score you have. This means you need to begin working on your credit before you apply for a loan. When you compare the interest rate for poor credit and one with excellent credit, you will see a massive difference in the interest amount.
Savings and credit scores are important when it comes to a mortgage loan and when you apply, you must do everything to put yourself in the best position to ensure that you get through the review process and are approved with a low-interest rate. Get your hands on a copy of the credit report a few months before you intend to buy. This will ensure you have the time to work on your credit. Based on what you find in the reports, you can work on improving your credit by disputing any incorrect information or paying down the credit card balances which carry a high interest. If there is no credit history, you need to start building one before you apply for the mortgage.

2. Know what you can afford

As a home buyer, you need to keep in mind that the house you have your eyes on might not fit in your loan terms. Think of the loan from the perspective of the monthly payment that can fit into your budget. A lot of lenders want to ensure that your debt is less than 40% of your income since the credit report will not reflect the amount you spend on food, medical bills, utilities, or transportation.
You must also factor in the other costs of owning a home like home owners warranty insurance, property taxes, home repairs, etc. It helps to be aware of these costs before you sign the mortgage. This will help you prepare for the upcoming payments and if the total expenses are less than the monthly rent you pay right now, you are already in good shape.

3. Look for assistance programs

Based on where you live, you will find programs and loans that come with reduced down payments or offer down payment assistance which can make the home more affordable. Many states also offer a reduced down payment and assistance for Emergency Medical Service providers, healthcare professionals, or police officers. Look for such initiatives before you apply for a loan since they can make homeownership easier on your pocket. There are hundreds of home-buying programs across the country, and you must check them out.

4. Start saving

This is something you should start doing from the day you decide to own a house. Savings can be used for a down payment as well as to cover the closing costs. They can also work as an emergency buffer if there is an unexpected life event. Having an emergency fund can help you in many situations and lenders will also see you as less risky. Set clear short-term, medium-term, and long-term goals and start saving. This way, you will stick to the financial plan and make better choices. Since you cannot start earning more right away, the best way to save is to cut your spending. Set a budget and stick to it, see where your money is going, and cut back on unnecessary expenses.
No matter the amount you earn each month, saving can go a long way and if you plan your home purchase right, you will be able to afford your dream home with any salary.
Banner image credit:  Photo by Tierra Mallorca on Unsplash

This post contains affiliate links, so we may earn a small commission when you make a purchase through links on our site at no additional cost to you. Read our disclaimer

Loading up next...
Stories by email|Subscription
Readers Digest

Launched in 1922, Reader's Digest has built 100 years of trust with a loyal audience and has become the largest circulating magazine in the world

Readers Digest
Reader’s Digest is a member of the Independent Press Standards Organisation (which regulates the UK’s magazine and newspaper industry). We abide by the Editors’ Code of Practice and are committed to upholding the highest standards of journalism. If you think that we have not met those standards, please contact 0203 289 0940. If we are unable to resolve your complaint, or if you would like more information about IPSO or the Editors’ Code, contact IPSO on 0300 123 2220 or visit ipso.co.uk