Homeownership percentages have reached historically low levels. The percentage of owners during the second quarter of 2015 fell to 63.4 percent, according to information released from the U.S. Census Bureau. With regards to past trends, the ownership level is at its lowest point since 1963.
Potential buyers, specifically millennials, are still hesitant to enter the market. There are numerous factors that contribute to their reluctance, such as high levels of student debt and stagnant wages. The economic downturn is still fresh in their minds as well. Instead of buying a house, millennials prefer renting. As a result, members of the millennial generation are finding it difficult to save for a house, bill payments and retirement savings, all while renting. Home ownership should be a life goal for a good majority of the population, as owning a house helps build equity - renting an apartment does not.
Some renters may find it difficult to save enough income to put toward a down payment, but it is possible.
It's time to budget
Everyone should have some type of monthly budget to help calculate their expenses. Your first priorities should always be rent, utilities, any loan and credit card payments, travel expenses and groceries. After that, create a list of priorities. This should include a monthly deposit into the fund for a down payment. Remember, it is highly unlikely you'll have enough cash up front to purchase a house. You'll need approximately 5 percent to 20 percent of the house's sales price to secure a mortgage, according to Zillow. There are some alternative options, such as Federal Housing Administration loans that require 0 percent to 3.5 percent down payment.
You'll benefit from having a higher up-front payment, but either way, a monthly budget will help you keep track of your savings.
Take a look at your monthly expenses and cut out the unnecessary expenses. For instance, consider paying for a cheaper cable subscription - if at all - and shop at different stores or even consider going on a shopping break. The same applies for food, as you should attempt to eat at home more often than eating out. In many instances, your health will benefit and you can put that extra money in the down payment fund.
Essentially, try to cut out as many unnecessary expenses as you can. A morning venti iced caramel frappuccino is undoubtedly delicious, but your bank account will thank you if you brew a pot of coffee every morning.
If you're serious about saving for a house, you may want to consider moving to a more affordable location, according to Mint's Kelley Anderson. For instance, you may want to find a cheaper apartment that can save you a few hundred dollars of month. Cheaper apartments aren't always in the most desirable areas of where you may currently live, but it's a worthy sacrifice in the grand scheme of things.
However, you may find some workarounds by remaining in a desirable location and pay less rent. You should find a roommate or two or even talk with your landlord. It never hurts to ask.
Use your best judgment
Creating budgets and trimming expenses are great, but only if you stick to them. Your hard savings work will turn useless if you don't stick to your goal of saving for a house. Renters, now is the time to use your best judgment and know when to purchase something, and when not to. Be smart with your money and how your spending disposable income. You don't have to tremendously cut back on having fun, but you shouldn't look to spend every last dollar.
Saving for a house is tough and will require patience. Stick to your plan, and before you know it, you'll have enough for a down payment.