Are you a renter looking to transition to homeownership? If yes, you’re maybe thinking of saving money for a down payment. Well, some inspiration can always help, and we went to the experts to find some tips for how you can get started on this journey. We have talked to Lyle D. Solomon, principal attorney at Oak View Law Group, about the financial mistakes you need to avoid and ways to save money fast for a down payment. Here’s what he shared with us:
1. What are the most common mistakes renters make that prevent them from saving for a down payment? How can renters avoid these mistakes?
- Signing the rental agreement without reading the fine print.
Many renters end up paying more than what they expected after signing the lease, stopping them from saving for a down payment. Check the fine print. Do you have to pay for utilities or parking? See if there are any additional expenses involved.
- Paying a huge amount of money for the rent.
Comparison shopping is a must. Paying too much for rent can force you to postpone your plan of buying a home. Check out the apartment evaluation websites. See how much landlords are charging for similar types of apartments. Visit a few properties and then make your decision.
- Not taking pictures of the rental apartment before moving in.
Unless renters take pictures of the apartment with pre-existing damage during move-in, they may have to make additional expenses. Usually, landlords take photos of the apartment, but renters don’t. If there is any dispute regarding damages, renters are held responsible without proof or documentation.
Renters must take pictures of all the items, especially the damaged ones, during the move-in process. They can ask landlords to fix them to avoid any unnecessary expenses later on.
2. What advice do you have for dealing with credit card debt?
Credit card debt can deplete a renter’s savings. Compounding interests and high monthly payments are enough to stop renters from saving for a down payment.
I have simple advice for all renters. Pay your credit card bills in full. Try to avoid paying rent with credit cards. Even if you have to, use a credit card that has the lowest interest rate. You could also ask the credit card company to increase your credit limit. But before doing that, learn how to negotiate with a credit card company. However, make sure you pay the total bill every month.
3. What advice do you have for dealing with student loans?
Student loans can be used for renting homes after paying tuition fees. But renters should keep one thing in mind, and that is the location. The housing location can make a big difference in the amount of money you can save. If your apartment is far away from campus and in a prime location, it will be expensive. Renters can only spend up to a certain amount of the student loan, nothing beyond that.
Here are a few tips for the renters who want to deal with student loans without giving up their dream of buying a new home:
- Share the apartment with a roommate to reduce your expenses.
- If you are working, set aside an amount to make monthly payments on student loans.
- If you can’t make monthly payments, negotiate with the lender for a reduced payment plan.
- Explore repayment options for federal student loans and take advantage of them. For example, income-based repayment plans, forbearance, deferment, public service loan forgiveness, etc.
4. What are some essential habits to implement to help renters save more money?
- Buy a renter’s insurance policy
Though it may seem to be an additional cost, it is a must for renters.
What if your belongings are damaged because of a fire and flood? The landlord’s insurance policy doesn’t cover your belongings. You have to cover all the expenses unless the landlord was aware that there was a pre-existing problem in the house and didn’t take any steps to correct it.
A renter’s insurance policy doesn’t cost you much, but it gives you significant benefits. If your belongings are damaged due to fire or flood, the insurance company will reimburse you.
- Choose the location wisely
Ideally, it’s best to rent an apartment far away from a fancy place but with an excellent transport hub nearby. Preferably, choose an apartment with a bus stop within walking distance.
- Negotiate with your landlord
At the time of lease renewal, negotiate rent with your landlord. Sometimes, landlords demand a higher rent citing several reasons, such as:
- The housing market has changed
- The landlord has received a few new rental applications
- The average rental price has gone up
Try to negotiate with the landlord in a way that benefits both of you.
- Find a roommate
It’s a great way to save money. You will get a partner to spend time with, and you can split rent with them.
5. How can renters best manage their expenses and budget for their needs?
- Focus on your needs
When it comes to spending money and budgeting, focus on your needs instead of your wants. Instead of choosing an apartment in a great location with a fantastic view, choose one that falls within your budget and fulfills your needs. You may love to have all the amenities in your apartment, but if you want to manage your expenses like a pro, buy only the things that you need.
- Buy affordable furniture
Expensive furniture can undoubtedly give a fresh look to your home. But that won’t help to reduce your expenses. Plus, those pieces of furniture will not be with you forever.
Buy furniture at an affordable price. Don’t give too much focus to the quality. You are most likely going to sell the furniture later on.
- Reduce your energy consumption
A few simple steps can help to reduce your expenses on utility bills. Please turn off the LED bulbs and other electrical appliances when you are not using them.
- Prepare fresh meals at home
When you are on a budget, cooking meals at home is a great idea to save money. Buy fresh vegetables from the local market and prepare simple meals in your kitchen.
6. What are the best ways to put money aside?
There are a couple of ways to put money aside. Here are a few of them:
- Contact your state tax department
Some state governments have introduced tax credits for renters. Contact your state’s tax department to understand the eligibility criteria. If you can fulfill all the requirements, you can probably save hundreds of dollars.
- Automate your savings
Open a separate savings account and transfer small amounts every month. Some banks even allow you to opt for transferring an amount to your savings accounts automatically.
- Get a full security deposit back
Keep your rental apartment in good condition so that you can ask the landlord to pay back the total security deposit amount. Some landlords may try to keep a significant portion of the amount if there is significant damage to the apartment.
- Choose a small apartment
A small apartment is less expensive with a minimum maintenance cost. When you are on a budget, try to find a small yet comfortable apartment that is enough to fulfill your basic requirements.
We hope these tips have helped you. Thank you, Lyle, for providing your expertise on the matter!