Houseowner – Homeowner Savings

How to Save Money for a House

Buying your first house is the pinnacle of adulthood. But as you’re probably well aware, the road to home ownership isn’t exactly easy to navigate. Unless you’re completely debt-free and disciplined enough to live below your means to save money, buying your first home in the near future can seem more like a fantasy than an actual possibility. In fact, a 2017 Zillow survey of 13,000 adults found that only 39% of millennials are able to make the standard down payment on a home, and just one in five can pay the bare minimum to secure a home loan. Yeah, it’s tough out there.

The good news is that buying a house doesn’t have to be something you only wish you could do. You can definitely make it a reality. But it may require you to make a bit of an adjustment. Fortunately, experts shared some sneaky ways you can save money for a house — and the timing’s perfect, since April is Financial Literacy Month.

What you need to know before you even think about buying your first house

When you’re looking to buy your first home, it is crucial to understand how to save money. As Dottie Herman, finance expert and CEO of Douglas Elliman, one of the largest real estate companies in the United States, tells us,

But before you even begin your search, Herman says it’s in your best interest to meet with a qualified mortgage lender. They’ll be able to help guide you through the process of qualifying and buying a home. Most importantly, constantly check your credit score. The higher the score, the better interest rate you will receive.

“For most people, buying a home is an exciting time. But it can also be a very long process that may seem like a financial hurdle that requires short-term sacrifices for long-term success,” Herman says. “By following a few smart and savvy ways to lower your expenses, you will be able to save enough money to purchase that dream home in less time than you think. In the end, it all comes down to discipline, desire, and you.”

So how can you save up for a house without making it seem like such a huge sacrifice?

Sneaky ways to save up for a house

1. Use cash as much as possible

Using cash may seem like such a hassle, but Adam Jusko, founder and CEO of ProudMoney.com, tells us it can save you a lot of money down the line.

“Many studies show that people spend more when paying with credit cards, so use cash instead,” Jusko says. “You’ll not only spend less on food and other items, but taking away the convenience of using credit means you simply won’t buy frivolous impulse purchases.”

According to him, the pain of going to the ATM to get cash will have a way of slowing down your spending. Just think, when you only have $10 in your wallet and no credit cards, you start to think of ways to prevent that money from being spent.

2. Split your paycheck into two separate accounts

This may not seem like a sneaky way to save at first, since you know you’re doing it. But if you have direct deposit, have your paycheck deposited into two accounts.

“I have my employer put the bulk of my paycheck into my everyday checking account, and then I have a specific amount from each paycheck that automatically goes into a savings account at another bank that I rarely use,” Jennifer Beeston, VP of mortgage lending at Guaranteed Rate Mortgage, tells us. “When it comes to saving, out of sight, out of mind can be very powerful.”

3. Skip online shopping every other month

Online shopping is the number one way people “mindlessly spend” money these days, Beeston says. Just think about your own online shopping habits. Are your purchases typically impulse buys, or do you mostly buy things you actually need? According to Beston, the nature of online shopping makes it difficult to truly understand or feel the cost of purchases.

That’s why she suggests banning online shopping every other month. Do a digital detox on your wallet. “This is a great way to save extra money,” she says. Just try it one month and see how much you end up saving. If it’s a lot, you might be more motivated to make it a regular thing.

4. Be flexible with your grocery list

When you’re trying to save money, flexibility is key. For example, if you really like Heinz Ketchup but there’s a sale on the generic store brand, go with the generic store brand.

Same goes for meals you’re trying to make. “When you see a sale, try to swap out a meal you’d planned to make with a cheaper meal using the discounted food,” Jusko says. This allows you to be a little creative, and can save you a bit of money at the same time.

“What are little things you can do to constantly remind yourself of the goal so you keep doing the right thing? No matter how frugal you are, there is one thing you are buying that you could leave at the store,” he says. “Make a game of figuring out how you could replace that item with things you already have at home or how to simply live without it.”

5. Make a calendar of things you’re not going to do

Most of us like to plan events on our calendar, but more often than not, those events mean spending money. Instead, Jusko suggests making a calendar of what you could do, but won’t. For instance, put down, “Not having dinner with Kim and Sam at that new restaurant on Friday.” Then, calculate how much money you saved by not doing those things.

“This may sound corny, but one of the hardest things about saving money is filling the time that would normally be spent on entertainment,” he says. “Being silly about the process by making it a game is key to making it happen.”

6. Buy a French press

If you’re a coffee lover, you probably know your daily drink of choice can seriously add up. You can even check your bank or credit card statements to see just how much you’re spending. But there is a way to save money without having to forego your caffeine addiction altogether.

“Instead of going to Starbucks in the morning and then again for your afternoon pick-me-up, go to Starbucks or another coffee specialty shop and buy the coffee grounds to make make your drink at home,” JJ Choi, an agent at real estate brokerage firm Triplemint, tells us. “A French press is an easy alternative vs. a big expensive machine. Coffee will net out to less than a dollar per drink compared to the $8 to $10 daily expense.”

Saving money to buy a house may take work and a lot of discipline, but if it’s something you really want, you can definitely do it.

7. Lock money away in a certificate deposit (CD) account

A CD is a savings account with a fixed interest rate and fixed date of withdrawal. Essentially, these are savings accounts with a catch. “A lot of people can save money, but they can’t avoid the temptation of spending the money when it’s sitting there,” Holden Lewis, home financing expert, tells us.

“You can buy a certificate of deposit for six or 12 months, and there’s a penalty for withdrawing the money early. That can help you keep your hands off it.” It’s definitely a good option if you’re known to tap into your savings account every now and then.

How to Organize Your Home

There’s no right way to organize your home. Whatever strategy you choose just has to work with your lifestyle, habits, and tastes. But there are a few tried-and-true strategies that can enhance the effectiveness of any system. From being aware of clutter hot spots to identifying red flags that your organizing method isn’t working, we learned some smart approaches to getting organized from the pros so you can save the time, money, and stress that come with living in a den of disorder.

1. Take a step back.

Often clutter becomes such a fixture, you look right past it. For a new perspective, imagine you’re a guest in your own home. Take note of things a visitor would notice that you’ve been ignoring, like the paper pile that has claimed the corner of the kitchen counter for months or the blankets strewn all over the couch. Then, refresh the room back to its original state by eliminating what’s making it appear disorganized. Still not seeing the junk? Snapping a picture of the room will force you to view your space through a different lens.

2. Make it easier to put things away.

“It always surprises me how difficult people make organizing for themselves,” says Kate Brown, certified professional organizer and owner of Impact Organizing LLC. Her suggestion: “Make everything a one-handed operation.” For example, don’t hide your laundry basket in the back of the closet. Instead, use an open bin that you can throw your clothes into from across the room. “And avoid lids at almost all costs,” she urges. Using open containers for things you use often like toiletries and cooking supplies makes it easier to put them away. This advice even applies to garbage cans. Brown recommends investing in one with a lever you can step on to pop the lid open. “The fewer steps, the better the organizing system,” she says.

3. Arrange items according to how frequently they’re used

Keep the items you use every day in plain sight—or at least at eye level. “The things you use daily should be the easiest to get to,” says Lowell. “While the things you use once in a while should require a step stool.” This is where high shelving comes in handy. “Things you use only once a year should require a ladder,” he adds. (Think attics or out-of-reach shelving in a garage.) Not only will this storage system make it easier for you to find the things you use often, but the items you don’t use regularly will stay organized until you need them.

4. Don’t buy storage containers until you’ve purged.

“When people want to get organized, the first thing they usually do is run out and buy storage supplies,” says Julie Isaacs, a professional organizer and founder of Uncluttered Home. “But that’s actually backwards.” The point, she explains, is to evaluate why you have so much stuff to begin with—not find new ways to house your junk. “You won’t have any idea of what you really need in terms of containers or shelving until you’ve purged.” While deciding what to keep and what to toss, always remember the “80/20 rule.” “It’s the theory that most of us only use 20 percent of what we have. That’s a good starting point to realizing you are surrounded by a lot of things you probably don’t need,” Isaacs says. Plus, not only will slimming down your stuff save you money on storage supplies, but it’ll save you the headache of going through excess items in an emergency or last-minute situation.

5. Eliminate clutter hot spots

Flat surfaces like your dining room table, entryway table and kitchen counters tend to accumulate piles faster than any other spot in the house, explains Isaacs, who advises clients to make clearing all flat surfaces part of their nightly routine—right along with washing their face and brushing their teeth. But if that doesn’t work, her last-ditch trick is to physically block any surface that has become a clutter haven. “For instance, if you put a flower arrangement in the middle of the dining room table and set it with placemats, you’re sending the message that the space is no longer a dumping zone,” Isaacs says.

6. Don’t treat drawers like catch-alls.

“There isn’t a drawer in your house that should not have container organizers in them,” says interior decorator Christopher Lowell, author of Seven Layers of Organization. They can be any material you want—wood, wire mesh or clear plastic—and are available at most home goods stores. “This allows you to separate the drawers into defined areas for specific things verses throwing everything into one big space,” says Lowell. For the bedroom, store everyday items—like underwear and socks—in top drawers, workout clothes in the second or third drawers and pants in the bottom drawers. In the bathroom, keep cotton swabs and other daily use items on the counter within arm’s reach, and tools you use occasionally under the cabinet. “With the things you only use now and then separated out and away from the things you need every day, those daily essentials will be better organized and easier to get to,” Lowell says.

7. Store a discard bag in the closet.

“I keep a shopping bag with a handle in the front of my closet. Every time I try on a piece of clothing and then take if off again because it’s unflattering, doesn’t fit, is pulled, stained or out of style, I put it in the bag,” Brown says. “If you’ve taken the piece of clothing off for any reason other than that it’s dirty or doesn’t match, that means it’s not right and will probably never be,” she says. When the bag is full, Isaacs explains, donate the clothes or trade them with a friend at a swap party.

8. Be picky about items in your home

Think carefully about what you allow into your home. Consider your needs before accepting hand-me-downs or agreeing to store a friend’s kayak for the off-season. If shoes aren’t your size, skip ’em. If you do have space to hang on to something temporarily, set a pickup date so your basement doesn’t become a free storage unit.

9. Sort smartly

When you’re ready to roll up your sleeves and take on an organizing project, follow these steps to restore (and keep!) order: First, do it in one shot. Set up a staging area, like the dining table, then empty whatever you’re organizing so you can spot doubles, giveaways, and must-saves fast. Then use organizers like clear containers and baskets without lids so you can quickly access what’s left of your pared-down collection. Lastly, label everything—even if you think you’ll remember, mark boxes and bins with easy-to-read descriptions so there’s no second-guessing later on.

10. Set limits for everything.

Assign things like memorabilia and craft supplies to a single shelf or bin, then let the designated area’s size dictate how much you keep.

11. Use your calendar

Give yourself real motivation to finally hang those family photos by planning to host a dinner party. Or try creating a deadline for the DIY project sitting in your basement. If the date comes and goes, donate the piece and any materials and move on.

12. Learn to make quick decisions.

Trying to determine what can stay and what should go? If at least one of the following statements is true about an item, then it’s a keeper:

I’ve used it within the last year. That’s enough time to have gone through all four seasons and special occasions. If you still aren’t sure, put the item in a “Donate Later” box, seal it and mark it with the date of one year from now. If you haven’t opened it by then, drop off the box at Goodwill without peeking inside.

I need it or I love it. If you don’t, there’s no real reason to hang on to it. Resolve to fill your space only with things that really work, give you pleasure or celebrate your family. Remember that you can’t appreciate what you have if it’s hiding in a dark corner of a closet. You should frame or display what you deem worth holding on to.

It fits into the life I want to live. If something supports you and your future goals (think exercise equipment or a book about starting a business), it can stay. If it’s a painful reminder of the past (think clothes that don’t fit anymore or items that belonged to an ex), let it go.

13. Look for signs that tell your system isn’t working.

If a room still somehow looks messy after you’ve cleaned, it’s time to improve your organizational system, which, according to Brown, should allow you to tidy up in 15 minutes or less. Once you’ve pulled out what you don’t need—to either throw away or donate—the next step is to group things together based on use or occasion and store them in open containers.

A Guide to Owner Financing

Asking a seller to help you buy their home is not something most homeowners, or even their listing agents, usually consider. However, for a seller whose home isn’t selling or for a buyer having trouble with traditional lender guidelines, owner financing is definitely a viable option. Also known as seller financing, it’s especially popular if the local real estate scene is a buyer’s market.

What Is Owner Financing?

Owner or seller financing means that the current homeowner puts up part or all of the money required to buy a property. In other words, instead of taking out a mortgage with a commercial lender, the buyer is borrowing the money from the seller. Buyers can completely finance a purchase in this way, or combine a loan from the seller with one from the bank.

For the financed portion, the buyer and seller agree upon an interest rate, monthly payment amount and schedule, and other details of the loan, and the buyer gives the seller a promissory note agreeing to these terms. The promissory note is generally entered in the public records, thus protecting both parties.

It doesn’t matter if the property has an existing mortgage on it, although the homeowner’s lender might accelerate the loan upon sale due to an alienation clause. Generally, the seller retains the title to the home until the buyer has repaid the loan in full.

Sellers and buyers are free to negotiate the terms of owner financing, subject to state-specific usury laws and other local regulations; some state laws, for example, prohibit balloon payments.

While not required, many sellers do expect the buyer to provide some sort of downpayment on the property. Their rationale is similar to any mortgage lender’s: They assume that buyers who have some equity in a home are less likely to default on the payments and let it go into foreclosure.

Owner financing can take several forms. Some variations include the following.

Land Contracts

Land contracts do not pass the full legal title of the property to the buyer but give them an equitable title. The buyer makes payments to the seller for a certain period. Upon final payment or a refinance, the buyer receives the deed.

Sellers can carry the mortgage for the entire balance of the purchase price⁠—less the down payment, which may include an underlying loan. This type of financing is called an all-inclusive mortgage or all-inclusive trust deed (AITD), also known as a wrap-around mortgage. The seller receives an override of interest on the underlying loan. A seller may also carry a junior mortgage, in which case the buyer would take title subject to the existing loan or obtain a new first mortgage. The buyer receives a deed and gives the seller a second mortgage for the balance of the purchase price, less the down payment and the first mortgage amount.

A lease-purchase agreement, also known as rent to own, means the seller is leasing the property to the buyer, giving them an equitable title to it. Upon fulfillment of the lease-purchase agreement, the buyer receives the full title and typically obtains a loan to pay the seller, after receiving credit for all or part of the rental payments toward the purchase price.

Owner-Financing Benefits for Buyers

Buyers who opt for seller financing can enjoy several advantages.

Quicker Sale

Offering owner financing is one way to stand out from the sea of inventory, attracting a different set of buyers and moving an otherwise hard-to-sell property.

Little or No Qualifying

The seller’s interpretation of buyer qualifications is typically less stringent and more flexible than those imposed by conventional lenders.

Down Payment Flexibility

Down payments are negotiable. If a seller wants a larger down payment than the buyer possesses, sometimes sellers will let a buyer make periodic lump-sum payments toward a down payment.

Higher Interest Rate

The owner-financed loan can carry a higher rate of interest than a seller might receive in a money market account or other low-risk types of investments.

Faster Possession

Because buyers and sellers aren’t waiting for a lender to process the financing, buyers can close faster and get possession of the property sooner than with a conventional loan transaction.

Lower Closing Costs

Without an institutional lender, there are no loan or discount points, and no origination fees, processing fees, administration fees, or any of the other assorted miscellaneous fees that lenders routinely charge, which automatically saves money on buyer closing costs.

Owner-Financing Benefits for Sellers

A variety of advantages for sellers arise in owner-financing situations as well.

Higher Sales Price

Because the seller is offering the financing, they may be in a position to command full list price or higher.

Tax Breaks

The seller might pay less in taxes on an installment sale, reporting only the income received in each calendar year.

Monthly Income

Payments from a buyer increase the seller’s monthly cash flow, resulting in a spendable income.

Tailored Financing

Unlike conventional loans, sellers and buyers can choose from a variety of loan repayment options, such as interest-only, fixed-rate amortization, less-than-interest, or a balloon payment⁠—if the state allows it—or even a combination of these. Interest rates can adjust periodically or remain at one rate for the term of the loan.

Advantageous as it can be, owner financing is a complex process. Neither buyer nor seller should rely just on their respective real estate agents but instead should engage real estate lawyers to help them negotiate the transaction, ensuring that their agreement conforms to all state laws, covers every contingency, and protects both parties equally.