For the vast majority of people, buying a home is the single largest purchase they will make in their lifetimes. Saving up for a down payment of that magnitude can seem incredibly daunting, especially for first-time homebuyers. Here are 4 simple steps to take to move toward buying a home.

Make a budget and stick to it

Knowing how much money comes in with each paycheck versus how much goes out and where it goes is the bedrock for saving money. Start with rent, insurance, and debts like car payments, student loans, and credit cards since these must get paid every month. From there look at subscriptions and other recurring expenses. Do you really need Netflix, Hulu, Disney+, HBO, Paramount+, YouTube Premium, and People magazine? After that, calculate how much you spend on eating out and groceries. If you are in the negative every month/pay period, find how to cut back and get ahead. From there, put a reasonable amount into savings that allows you to come out a little above even every month.

Saving small amounts adds up

After you have done your budget, say you can save $150 per paycheck. If you get paid twice per month, that’s $300 monthly and $3,600 per year! If you have a partner or spouse you want to buy a home with who can also save $150 per paycheck, that doubles your savings power to $7,200 per year!

What if you cut back on your “going out to eat” budget by $30 per week and put that into savings. In 1 month, you have saved $120. In a year, you saved $1,440!

If you cut your subscription to Disney+, you save $10.99 per month, which equates to $131.88 over 12 months.

If you combine all of these yearly savings, you just saved $8,771.88. Wow!

For reference, it will take 2 years of saving this much for a 5% down payment on a $350,000 home. 5% is a qualifying amount for an FHA loan for first-time homebuyers.

Build your credit score

Your credit score is the backbone of your ability to get a loan of any kind. As of publishing this blog, the average credit score in America is 714 according to Experian. With that credit score, you will be in good standing for some loans. Above 720, your rates will improve, and above 750-760, you will likely get the best rates possible. If you have lower credit and want to raise it, there are plenty of ways to do that.

• Paying more than the minimum amount on credit cards
• Paying off credit cards entirely and keeping the balance low (below 33% is the rule of thumb)
• Making multiple payments per month on debts
• Not opening new lines of credit
• Not closing credit lines

Keep in mind that raising your credit score takes time and happens gradually. If your credit score is bad, it will take longer to raise it to a higher/more acceptable level. Paying a little extra on your debts will pay dividends down the road (just like putting money into savings!)

Speak to a financial advisor

A certified financial planner is a popular option for getting your finances in order. They can help you outline your savings goals, assess your financial standing, and help you set reasonable goals for spending and saving. You can also speak to a loan officer, who can help you find out what you can afford to buy, as well as get you pre-qualified and pre-approved when you are ready to buy a home.