Budgets are like diets: Even when you know they’re a great idea, sticking to them is difficult! Much like diets, however, putting in the hard work and short-term sacrifices can yield amazing results. Every penny counts while working toward a home purchase—and creating a budget is just the beginning.
Here’s how to keep your budget on track to buy a home this year.
Track Your Path to a Home Loan
Ready to turn that budget into action? Great! While creating a budget is step one, what counts is sticking to it.
Sure, monthly mortgage payments might feel like they’re in the distant future, but tracking your spending now paves the way to success. Start by listing all your expenses, from those pesky student loans to your weekend entertainment fund.
By keeping tabs on your spending habits now, you’ll get a real feel for the payment amount you can manage. Fire up a spreadsheet and track every dollar that leaves your wallet, whether through credit cards, digital payments, or cash. Trust us, first-time homebuyers who master this skill become mortgage lenders’ favorite people to work with!
End each month with a quick reality check. How did your actual spending stack up against your goals? If things went a bit sideways, no worries—just tweak your strategy for next month. Starting this habit now will help you manage expenses like homeowners insurance and private mortgage insurance (PMI) later.
Balance Your Budget Like a Pro
Let’s be honest: Life happens. Maybe you blew your entertainment budget on birthday parties and last month’s once-in-a-lifetime concert. That’s okay!
When saving to purchase a home, you have time to recover from an occasional splurge. Conventional loans and FHA loans will still be there when you’re ready.
Think of your budget like a seesaw—when one side goes up, the other needs to come down. You can balance any extra expenses by pulling back on next month’s spending. If that’s not possible, you can spread the adjustment over several months instead.
Remember, the loan will last much longer than this saving period. You’re setting up the habits that support your homeownership. Don’t let a few detours derail your homeownership journey.
Pro tip: Set aside a small portion of your monthly budget for “can’t-miss moments.” This way, you’re prepared for mortgage payments, closing costs, AND life’s little celebrations.
Make Cash Your Budget’s Best Friend
Going old school with cash is a great way to keep tabs on your spending! Fixed expenses like rent, insurance, utilities, and student loans can stay on autopay. Switch to cash for everything that might delay your dream of homeownership.
Why? Because nothing makes you think twice about a fancy dinner out like watching physical dollars leave your wallet!
Here are two ways you can approach this strategy:
- The “One-Envelope Wonder”: Stash your entire month’s spending money in one envelope. When it’s gone, it’s gone!
- The “Category Commander”: Create separate envelopes for different spending types, such as dining, shopping, and entertainment. Once your “fun fund” runs dry, it’s time to get creative with free activities!
Pro tip: Leave those credit cards at home! Keep one for genuine emergencies (and no, that triple-shot caramel macchiato doesn’t count, no matter how rough your Monday was). Every dollar you save brings you closer to qualifying for your mortgage loan.
Teamwork Makes the Dream Work
You might be a budgeting pro, but what about your partner? When you’re planning to purchase a home together, you both need to be in the game. Equal housing lender requirements mean that both of you are on the hook for those monthly mortgage payments!
Maybe one of you is the spreadsheet wizard or the “responsible one” with money. However, your combined financial health matters, from your gross monthly income to your spending habits. When one person overspends, it affects your whole savings strategy. Think of it like a dance—you both need to know the steps!
Here’s how to get in sync:
- Have “the money talk” early (yes, even if it feels awkward).
- Share your concerns about additional expenses like insurance premiums.
- Set up regular budget check-ins (maybe over pizza?).
- Be honest about the spending challenges you’re having.
Remember that, as a couple, your path to homeownership is a team sport. The life of the loan could be decades. When both parties commit to the same goal, hurdles become more manageable. Mortgage lenders love seeing couples who are financially in tune with each other!
Pro tip: Celebrate your wins together as you build your homebuying budget.
Plan for Homeownership Success
Planning your spending doesn’t have to be complicated. Start by looking ahead at your calendar and anticipating upcoming expenses. This habit will set you up for success with monthly mortgage payments and insurance premiums as a first-time homebuyer.
Think about it: Meal prepping on Sunday saves you big bucks that can go straight into your homebuying budget. When you spot your mom’s birthday on the calendar, you can adjust your spending now to make her day special while staying on track with your savings goals.
Sometimes, staying focused on your additional expenses means saying “not right now” to happy hours or weekend getaways.
Pro tip: Check your calendar at the start of each month and plan for:
- Upcoming social events
- Birthday gifts and celebrations
- Seasonal expenses
- Regular payments like student loans
- Any surprise expenses that might pop up
Additional Resources
APM has put together several resources to help guide your homeownership journey and keep you on the path to success:
And if you’re ready to take your homeownership journey one step further, click here to connect with an APM Loan Advisor in your area.