Saving tips for first-time homebuyers

Category | First Time Home Buyers
It's easier than you think to save for your first house.

Many Americans got shut out of the housing market when the financial crisis hit at the end of the last decade, but things are finally starting to look up. While the market hasn't quite returned to its pre-recession highs, it's certainly on its way, and the market is finally ready to welcome first-time homebuyers who haven't been able to buy a home thanks to tight lending requirements and a lack of available funds. 

Employment is up, and wages have shown signs of growth in recent years, so more people than ever should be able to buy a home. If you are someone who finally feels ready to enter the housing market for the first time, you might be wondering how to start saving for this major expense. 

While it's not easy to save for a house, you can make your homeownership dreams a reality with a bit of discipline and effort. Here are some tips that will help you stockpile the cash you need:

1. Figure out how much you need
When people say they're "saving to buy a house," they really mean that they're gathering enough money for a down payment on a home. The remainder of the money for the home purchase will come from a mortgage. How much you need to put down for a down payment is variable, and is influenced by a variety of factors. 

"Down payments are influenced by several factors."

Generally, mortgage down payments total between 10 and 20 percent of the home's total purchase price, according to Mortgage 101. That means buyers would put down $20,000 on a home that cost $200,000. Because home prices are quite high in some parts of the country, a 10 percent down payment can be cost-prohibitive for many first-time buyers.

There are ways to decrease the required down payment, but doing so requires the buyer to have a particularly strong credit score, work through certain types of lenders or spend more on mortgage premiums each month. When you begin saving for a home, evaluate your current financial situation and set a realistic down payment goal for the types of homes you'll be looking at. 

2. Set a deadline
Saving for a home is not something you can accomplish in fits and starts. It requires a consistent approach. Setting a deadline for yourself is one of the best ways to impose a structure on your savings plan, according to Coldwell Banker. You'll probably want to set up a separate savings account for money that will end up going to your home purchase so that you don't feel tempted to use those funds for other expenses. Set up consistent check-in dates prior to your overall deadline to make sure you're progressing toward your goal. That will help you evaluate whether your timeline is realistic. 

3. Create a budget
This is probably the most important part of the savings process, and it's also one of the most difficult parts to execute. A strict budget will cut down on the unnecessary expenditures that make it difficult to save. To establish a workable budget, you'll need to develop a strong understanding of your current monthly bills and spending. 

"A strong budget cuts unnecessary expenditures."

You don't need to cut out all extraneous spending to create an effective budget, but you do want to find areas where a small change can result in big overall savings. If you buy a coffee each day for three dollars, you are spending hundreds of dollars a year. While putting that money into savings will not account for your full down payment, it can be an important part of your overall budget. Making these seemingly minor changes can quickly add up.

4. Save unexpected income
Most people receive a few lump sums of cash throughout the year as a result of unexpected events. This could be a larger-than-expected tax refund or a bonus from work. Regardless of how you receive this money, place any windfalls into your down payment savings account rather than spending immediately. It may be difficult to save that money, but doing so will help you reach your goal more quickly without affecting your existing budget.

5. Find the right lender
Tight lending requirements introduced after the financial crisis have been a major hurdle for new homebuyers and make it tremendously difficult for many to get the financing they need. Despite minor improvements in people's ability to get loans, the Mortgage Bankers Association's Mortgage Credit Availability Index demonstrates that loans remain substantially harder to come by than they were in 2004, before it became incredibly easy to procure a loan prior to the financial crisis. 

Borrowers need to find a lending partner who offers amicable lending terms, and Impac Mortgage Corp. Retail has a wide range of loan products to suit nearly any borrower's needs. 

© 2019 Impac Mortgage Corp., Corporate Office located at 19500 Jamboree Rd., Irvine, CA 92612, 800-597-4101. NMLS #128231, AL #MC20787; AK #AK128231 AZ #BK-0910550; California Licensed by the Department of Business Oversight, under the California Residential Mortgage Lending Act #4131083; Colorado Regulated by the Division of Real Estate; Georgia Residential Mortgage #23673; Illinois Residential Mortgage Licensee; Kansas Mortgage Company License #MC.0025417; Licensed by the Mississippi Department of Banking and Consumer Finance; Nevada 2831 St. Rose Parkway, Suite 215, Henderson, NV 89052 702-589-4637; Licensed by the New Hampshire Banking Department; Licensed by the N.J. Department of Banking and Insurance; Impac Mortgage Corp. dba Excel Mortgage - NY Licensed Mortgage Banker—NYS Department of Financial Services; Ohio Mortgage Broker Act Mortgage Banker Exemption #MBMB.850196.000; OR #ML5014; PA #46178; Licensed by the Virginia State Corporation Commission #MC-5526; and WA #CL-128231. All applications are subject to underwriting guidelines and approval. Not all programs available in all areas. Other restrictions may apply. Also doing business in AR, CT, DC, FL, HI, ID, IN, IA, KY, LA, MD, MI, MN, MO, MT, NE, NC, ND, NM, OK, SC, SD, TN, TX, UT, VT, WV, and WI. NMLS Consumer Access - Equal Housing Lender
*Impac Mortgage Corp. is not licensed to conduct business in the following states: CT, DE, MA, MD, ME, NY and WY.

Website authorization by New York State Department of Financial Services is pending. Until this website is authorized, no mortgage loan applications for properties located in New York will be accepted through this site.

Reminder: Loan applications or inquiries will be addressed by Impac Mortgage Corp.’s CashCall Mortgage division.