While minimum down payments have decreased, it is best to have at
least a 20 percent down payment before purchasing a home in order to
truly take advantage of the lowest interest rates, inexpensive monthly
mortgage payments and overall savings, according to Betterment.com.
Prospective
homebuyers also need to take into consideration other closing costs,
like appraisal, private mortgage insurance and property taxes. You
should also make sure you have an emergency fund and enough savings for
potential home repairs, in addition to your down payment, before
purchasing your home. Therefore, it is important that you are serious
about saving your money before even considering buying a home even when
the
real estate scene in Malaysia is at its lower point these years.
Read these tips for saving up for a down payment, as well as other closing costs, home repairs and your emergency fund.
Open a Savings Account
If
you are currently only using a checking account, open a savings account
at the same bank or credit union. Using one financial institution is
much more convenient, since most banks and credit unions allow you to
transfer funds back and forth from accounts electronically and
instantaneously. You can easily
move money into savings from your
checking account online without visiting a physical bank. Savings
accounts also tend to have a much higher interest rate than checking
accounts, so this is an easy method of saving money while gaining more
in interest.
Start a Budget
You can create a
budget on a spreadsheet, according to The Simple Dollar. Write down your
monthly gross income, then subtract taxes and other regular monthly
costs -- like rent, gas, utilities, transportation, car payments, credit
car bills and student loans -- from your paycheck. Once you have
subtracted those steady costs, you can see how much money you have left
each month and determine how to spend or save it.
Begin
by tracking your spending for two or three months, writing down your
restaurant, entertainment, parking and clothing expenses. You will be
able to quickly see how much money you take in and how much goes out on a
monthly basis and determine where costs can be cut. Income and expenses
tend to be about the same from month to month, so the only way to start
saving more money is to either bring in more money or change your
spending habits.
Change Your Spending Habits
Determine
if there are any costs that you can cut from your day-to-day life. For
example, are you subscribed to any monthly services that you don’t
really need? Do you really need to buy fancy coffee from the coffee shop
every day or can you simply make coffee at home and bring it to work in
a travel mug? Can you decrease the number of times you go out to eat at
restaurants every month? Can you cut out going to the movies on a
weekly basis? Once you change these spending habits, you can really
start saving money. Don’t be afraid to be ruthless in cutting costs from
your budget. Ask if each and every dollar is justified.
Bring in More Money
Those
that save the most money are people who have multiple streams of
income. If possible, take on an additional part-time or even full-time
job. Consider freelance writing or selling any clothing or belonging you
no longer want on websites like eBay. You can also start your own side
business to earn more money. Starting a business could be financially
risky, as many businesses fail. However, starting a successful business
is one of the best ways to build your savings.
Check Interest Rates
Interest
rates differ vastly for credit cards, saving accounts, car loans and
other types of loans and accounts. Therefore, it is important that you
go through every bill and account and check the interest rate on each to
determine if you can do better. For example, if you are consistently
paying off your credit card payments, then you should call your credit
card company and tell them that you want a lower interest rate. You can
easily achieve a lower rate just by asking.
With car
loans, it often makes sense to prepay your debt, but many loans use a
sum-of-the-digits interest calculation, in which case, prepayments are a
less attractive option. Auto lenders are exempted from rules that
mortgage lenders are subjected to, which means that auto loans are less
regulated. If
you are paying really high interest on your car, it
might make sense to sell it and buy a less expensive used car instead,
especially if you want to focus on saving money for your down payment
right now.
Check Your Credit Score
Your
ability to borrow money for your home is closely linked to your credit
score. Therefore, it is crucial that you have strong credit. Check your
credit score on a regular basis to make sure that it does not have any
errors and to know and understand where you stand and if you need to
improve. Make sure that you check your credit report for factual errors
or out-of-date items several months before you apply for your mortgage,
so that you have enough time to take care of any errors or disputes
before getting pre-approved for your home loan.
Accept Gifts
There
is another source of savings that is often overlooked and that is
gifts. You are allowed to use gifts from parents, relatives and friends
for your down payment. In order for money to be recognized as a gift,
the donor must sign a gift letter, explaining that there is no
expectation of repayment or interest.
There are also down
payment assistance programs that help first-time buyers purchase homes.
While some offer interest reductions and tax benefits, others offer
grants that don’t need to be repaid. Look into these assistance programs
and determine whether you fit the qualifications before moving forward
with applying for grants or gifts.