America Saves Week: Homeownership and Saving
America Saves for Homeownership
Every year, credit.org celebrates America Saves Week. As a sponsor of Inland Empire Saves, we believe this initiative can teach people across the United States the importance of saving.
But saving is a full-time endeavor that we hope will extend well beyond America Saves Week. An important aspect of saving is being conscious of what goals one is saving toward. Homeownership is one of the most important savings goals we want to highlight.
Saving for Homeownership
- Become a homeowner for the right reasons. The recent financial crisis has many people debating that home buying isn’t such a great idea, and savers should put all their money into retirement funds instead. We don’t think that advice is sound. The problems with the housing market in 2007-2008 had to do with too many people treating real estate as an investment, and like all investments, it doesn’t always pay off with big returns. That’s not why you should buy a home. Buy a home so you’ll have a roof over your head. You don’t need home values to skyrocket; you just want to pay off your mortgage by the time you retire. Then you’ll have a place to live without needing to pay rent or a loan payment. That makes living off of your retirement income much easier. That’s why we want everyone to become homeowners.
- There are significant financial advantages to homeownership. Just income taxes alone add up to a significant benefit. A study published by the National Association of Home Builders showed that the first five years of homeownership saves a typical household $8,607 on taxes. Be honest—have you set aside that much money over the past five years? If you’re a homeowner, you can reap these benefits without having to do any extra saving.
- Make sure you’re ready. Typically, you will want to save up 20% of the mortgage value before you borrow. Being able to come up with that amount signifies that you are financially ready for homeownership. But a lot of first-time home buyers have trouble meeting that goal, so there are FHA programs that can help people buy a home with as little as 3% down. Before getting such a loan, take a First-Time Home buyer Course from a HUD-certified housing counseling agency. That way you will have a much better idea if you’re ready for homeownership.
- Only buy what you can afford. Don’t stretch yourself too far—aim for a house with a mortgage payment you can handle. You’ve heard a lot about homeowners displaced during the recent financial crisis, but millions more weathered the crisis with their homeownership intact, because they were not stuck in houses they couldn’t afford when the economy took a downward turn.
- Get help from professionals. Housing counselors are available to make sure you have thought of everything. If you’re thinking of becoming a homeowner, make sure you get free pre-purchase counseling first. This also can help you if you used to be a homeowner, and are looking to buy another home after overcoming a period of financial hardship or unemployment. Also, get pre-qualified from a reputable mortgage broker, and work with a professional real estate agent. They can give you the benefit of years of experience with home buying.
- Use smart savings strategies:
- Have your paychecks direct deposited into your account, and have a portion automatically diverted into savings.
- Use your refund wisely. If you have a tax refund coming, use that to kick-start your savings fund, or pay down debt that might be holding you back.
- Speaking of debt, focus on paying it down. If you don’t know how much interest you’re paying toward credit card debt every month, get a free credit counseling session so you’ll have a better idea what that debt is really costing you.
- Follow the 24-hour rule. For any significant purchase, force yourself to wait a full day before going through with it. Cutting out impulse shopping and giving yourself time to find a better price for the item will add up to big savings.
- Create a written budget; check out our free courses in the FIT Academy to learn how to start budgeting, plan your paycheck, and more.
Becoming a homeowner is a big step, but one everyone should take if they want to have a truly secure and stable retirement. We’re here to help you plan your savings for this important goal, prepare the paperwork for the home buying process, and do everything you can to keep your home if you run into financial trouble. Contact us today if you have any questions or are ready to take the next step.