Yes, You Can Afford Your Own Home—Here's How
If there’s one part of the American dream that’s stayed consistent over the last 50 years, it’s the desire of homeownership. While the vision of a quaint house surrounded by a white picket fence has been replaced by a modern high-rise or studio apartment, millennials still seek the same sense of stability that their grandparents and parents wanted, according to the National Association of Realtors.
Whether your homeownership dream stems from a need for independence, a desire to decorate your dream space, or a want to prove you’ve become an adult with a capital A, one thing’s for sure: Without the right advice, buying property can be seriously daunting. To navigate one the biggest purchases of your lifetime, we turned to financial expert Lauren Bowling of L Bee and the Money Tree. Here’s how to do it on your own terms and turn your first home dream into a reality in five years or less.
If You Want a Home in 5 Years
Paying off debt should be your absolute priority, says Bowling. “Five years is a substantial amount of time to both save up a down payment and focus on getting rid of any debt,” she tells MyDomaine. “Paying off debt will both improve your credit score and put more money into your budget for when the time comes to accommodate for a mortgage, insurance, and taxes on your first place.” If you receive an unexpected lump sum, such as “bonuses, cash gifts, raises, etc.,” put it directly into your savings account to boost the balance.
“Focus on increasing your earning power, too,” she suggests. “Now is the time to negotiate that raise at work, take a course that makes you more valuable or switching to a higher paying job if it allows. Earning more is a great way to increase the money you have for financial goals.”
- Prioritize paying off debt.
- Treat lump sums of money (bonus, tax returns) as savings, not income.
- Ask for a raise or explore alternative income streams.
Hello, New Home:
If You Want a Home in 2 Years
Two years is a “great amount of time to start planning for homeownership, as you have enough time to generate decent savings while fixing any issues with your personal finances,” says Bowling. “Set a fairly aggressive budget, but not the shoestring one you’d need for a shorter time frame. Include things like bringing your lunch to work, but allow yourself a once-a-week or once-a-month splurge. You can still plan for a vacation or a big purchase, but keep in mind the long-term goal.”
She again stresses the importance of paying off debts first, but thereafter, consider alternative income streams to earn more. “Two years is enough time to start a more substantial side business, like an Etsy store or running a money-making blog,” she says. If that’s not really your thing, you can move to a lower-priced rental to free up more money. She also recommends “pulling your credit report to look for any errors or issues. If there are any, you can dispute it and still have time left for your score to significantly improve.”
- Start to cut back on lifestyle expenses, such as frequently ordering takeout.
- Consider starting a side hustle, such as an online store.
- Search for a lower-priced rental.
- Review your credit report, and dispute errors.
If You Want a Home in One Year
It’s not impossible, says Bowling, but you’ll have to be on your best financial game. “You need to be hyper-consistent with your savings and be able to commit to living on a tight budget for 12 months in order to save up enough cash for a down payment. Depending on how much you earn and how motivated you are, this can absolutely be done,” she notes. “First, take a look at your budget and determine where you can cut back. Once you have a number of how much you can set aside to save, automate this amount into an account completely separate from your primary account so you’re not tempted to touch it.” Then, she says, “definitely cut out the cable—you can do it for just one year!”
She stresses that saving alone won’t yield the results you need in a short timeframe. “If you want to save over $10,000 in one year, you’ll have to start side-hustling. Sell your old stuff, join a rideshare service, take online surveys, baby- or pet-sit, or take another part-time job to make quick extra cash for your down payment.” Bowling also cautions that “if you have a lot of debt or your credit is messy, you might not be able to swing buying a home in under a year as you’ll need extra time to shore up your finances in addition to saving for that down payment. Only those who have relatively low debt and decent credit would be able to qualify for a competitive loan rate in this short of a timeframe.”
- Check your credit score and find out if you qualify for a loan.
- Automate savings into a separate account.
- Cut back on everything you can stand to, including streaming services and other non-essentials.
- Be proactive about boosting your income via small but lucrative initiatives.