How To Save Money For A House

You are ready to buy your first home but are wondering how the heck you are going to afford it. There are a few things you can do to make it easier. For example how much money do you have to save? Or how can I afford to buy a home?

This article will offer you some tips on how to save extra money per month on your house savings goal.

What is the Average Cost of a House and How Much Savings do I Need?

There are many factors that affect the cost of buying a house. It’s not just the price of the house, but also how much money you need for a down payment, taxes, and insurance.

According to Rocket Mortgage article about “How Much Income Do I Need To Buy A House?” the average home price in the U.S. is $284,600. Putting down a 20% down payment is an expected payment of 1,200 a month on your mortgage. For an estimate on your income, you should be making at least $4285 a month.

However, that number can vary depending on where you live and how much you want to spend on your mortgage payments.

Save Money For A House: a couple sitting down with a mortgage broker

Preparation before you start saving for a House

How much house are you buying?

Make a wish list of everything you need in your home then start dream house shopping. Consider the area, schools, how many bedrooms, and yard size. Think of everything because the money you are spending has to be worth it.

If you want to see homes in person attend some open house in your desired area. Otherwise, I love scrolling online for homes. If I see something I like about the house I save a picture. The picture serves me as inspiration for saving money because that is a challenge on its own.

After seeing a few homes in your area online you should have an idea of your dream home.

What percentage do you want to put down?

Do you have to put 20% down? Not really anymore because some mortgage lenders offer down payments as low as 3%. However, 20% will probably help more with the overall costs and interest rate. If you need to put down a smaller down payment, there are government loans like FHA loans which you can get as a down payment for 3.5%. And if your looking at a VA loan or USDA loan you might not have to put down any money for a down payment.

It’s good to speak with a mortgage lender to see how much you will need to put down and how much of a home you can afford. Once you have some numbers to strive for turn this goal into your savings.

Save Money For A House: a father pushing his son in a cardboard box

Saving Tips for Your House Savings Goal

Build a Budget to Save for A House

If you want to save money for a home budget for one. You can’t start saving without knowing where you’re money is going. And now if you were saving already, you have something larger to save for.

Check all of your accounts, not just the one you receive your income. Also, take a look at your credit card statements. Create a realistic budget while saving for a home in mind.

Consider going on a few non-spending challenges to make budgeting easier throughout the year.

Do you need a revamp on your budget? Or maybe need a new budget that will work for you? Read some of these articles that are full of actionable steps to start budgeting today!

Save Money For A House: a woman sitting down on the couch with her coffee and laptop

Start Saving Early

The sooner you start saving, the more time your money has to grow and build up for your down payment. As a first-time homebuyer, this will be one of the biggest steps in the process because there is no way around having a sizable down payment for most mortgage lenders.

Start by saving at least 10% of every paycheck into an emergency fund before putting any money towards a house. Then try to save at least 20% of every paycheck after you filled your Emergency Fund.

Start building your savings account for your down payment that is attached to your checking account. Preferably the checking account that you receive your income.

List what you can do without

This might be an expensive gym membership or an expensive hobby. It could also be a monthly subscription to the local newspaper, the premium channels on your cable package, high-speed internet service, and so on.

Cutting back is a good way to save if you have a tight budget. If your goal is to save for a house a few sacrifices on entertainment or shopping are worthwhile.

Calculate your savings each month:

Once you have a list of things that you can live without, calculate how much money those things cost each month and then take that amount and put it into a savings account for your house.

Save Money For A House: a family going up the steps to their new home with moving boxes

Things to plan for when buying a house

Lowering your Debt to Income Ratio

When applying for a mortgage, lenders look at your debt to income ratio. And if your debt is low it looks better for you as a good candidate. This is one of the first things to consider.

You might want to look at your credit report and see how you can rid some of the debt before you save for the down payment. Doing this might take you longer to save for your house but it will work in your favor.

The more debt you have, the less favorable you are as a candidate. This can mean that you’ll pay more in interest and have a higher down payment requirement.

Work on your Credit Score

The better the credit score you have the lower the interest rate on the loan. And the lesser down payment you have to make.

Check your credit score for opportunities. There might be errors on your report to dispute or aged accounts that have not fallen off. Credit reports are not always 100% accurate so it pays to look at them a few times every year.

Summary

Saving for a home can be difficult but it’s also rewarding. To finally get into your first home can be a dream come true. Just remember that the changes you make now to save will lead to you getting the keys to your future front door.

You may also like...

Popular Articles...

Leave a Reply

Your email address will not be published.