About 65% of people in America are homeowners. One of the most fulfilling feelings is having enough money to put a down payment on your dream home. While it may seem impossible at times, it doesn’t take too much work to know how to save money to buy a house.
There are steps you can take to ensure that your hard-earned money is not being spent frivolously and instead you can set it aside for your future home. While it may be easy to get overwhelmed by all the things you have to consider, this guide will help you navigate saving money to buy a house.
Set Goals for Yourself
The first thing you want to do is figure out how much money you need to save up and what the time frame for that should be. There are three main things you’ll need to save up for so keep these in mind as you figure out those goals.
You’ll probably be saving up primarily for the down payment. When you choose a mortgage lender, the down payment is the upfront cash you’ll pay when getting the mortgage to buy a home. The amount you’ll need to save for a down payment depends on the type of mortgage and the lender.
Some down payments are as low as 3%, use a down payment calculator to figure out how much you’ll need to save. You’ll also need to save for the closing costs which are usually 2%-5% of the loan amount. They’re fees to finalize the mortgage.
Lastly, consider any moving expenses that you’ll need to pay after you buy your new home. This includes the moving process, furnishing the house, and any fixes that need to be done.
Once you know how much you’ll need to save up for, think of a realistic deadline to have the money by. Try to give yourself some wiggle room so you don’t get discouraged if your goals aren’t met in a short amount of time.
More About Down Payments
Dealing with debt is an unfortunate reality for many people and, likely, you don’t want to deal with a huge mortgage payment. The more you save, the less you’ll need to pay monthly. Of course, you don’t want to be saving up for so long that the dream of owning a home is too far from your reach.
That’s a personal question to answer and it depends on several different factors. For one, you need to figure out how much you can afford monthly. This can be done by figuring out monthly mortgage payments and arriving at the total amount.
Let’s say you do a 10 year fixed rate, this ensures that you save a significant amount of money when compared to the traditional 30-year option. While you can find a way to only pay 3% of the mortgage for a down payment, you should aim to put down 10% – 20%. This will lower your interest rate and help you avoid private mortgage insurance.
Ways to Save Money
To start saving, you’ll need to learn how to spend less. This means having a budget plan or building a better budget than your current one.
Check where you’re spending the most money – student loans? rent? utilities?
See if you spend a lot of money on nonessentials like entertainment and restaurants. You can use a budgeting app to help you.
If you are spending a lot on rent, try downsizing to a smaller apartment so you can reduce the amount you’re spending on a temporary place. You can also sell an additional vehicle and downsize to a less expensive car to add some extra cash to your pockets.
As you look at your usual spending, you might start noticing that some of your money is going to bad habits. This might mean anything from going out to the bar too often to spending a little too much on cigarettes. Cutting out these bad habits are sure to help you save money (and improve your health!)
Another thing you can do, which is not ideal but it is an option, is to skip your next vacation. Vacations tend to be a huge expense and that money could be going towards your new home. You have to reevaluate what’s important to you during big financial decisions like this.
If you can take a tiny vacation and still meet your goal deadline, it might still be worth it. However, think of some local activities you can do instead. While it may not be as fascinating, it’s a lot more budget-friendly.
Find Extra Cash
Another way of saving up for a house is to find ways to make extra cash. Consider finding some freelance work in your field to make some additional money. Maybe becoming a rideshare driver, see if anyone needs some petsitters, or check if any websites need surveys done in exchange for cash.
If you have a full-time job and you are performing well, you could see if your boss will give you a raise. Be sure to time it right, come prepared to ask and be confident in your work. While it may seem risky, it’s worth it if it means some extra money in your pocket!
How to Save Money to Buy a House
Picture this: you deposit your most recent check and you realize that you hit your goal for a down payment. Think of the excitement and feeling of accomplishment you’ll have. This isn’t a far fetched dream, all you need to do is know how to save money to buy a house.
By setting goals for yourself and saving wisely, you’ll be able to walk through the front doors of your dream home in no time.
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