Thinking of investing in real estate but still wondering how to save for a house? There’s no denying that saving enough money to buy a house can initially seem complicated. But don’t let that thought deter you from pursuing your first big purchase.
If owning your own home is something you’ve always dreamed of, you need to keep going and find a way to make it happen.
Here are some tips on how to save for a house:
1. Take a closer look at the costs and your expenses:
The first step to saving for a house is to figure out how much it will cost. This will help you set a savings goal and give you a better idea of how much you need to put away each month.
When saving for a house, you’ll need a pretty sizable nest egg to cover all the costs associated with buying and owning a home. Down payments, closing costs, mortgage payments, property taxes, insurance, and repairs and maintenance can all add up quickly.
To start saving for your future home, check your budget and see where you can cut back on expenses. Consider setting up a dedicated savings account for your down payment fund and make regular deposits. This will help you reach your goal of saving for a house more quickly. The following cost breakdown will give you an idea:
A down payment on a house typically ranges from 3-20%, so you’ll need to factor that into your savings goal. For example, if you’re looking at a $700,000 home, you’ll need to save $140,000 in the worst-case scenario. But no worries, we are here to guide you and help you find the lender with the lowest rate.
Side note: when you are buying a house, the bank will require you to have what you have saved for your down payment in your bank account for at least two months in a row.
Bonus: there are assistance programs that can help you pay zero down payment. Contact me if you’d like to learn about those.
In addition to the down payment, you’ll also need to factor in closing costs, typically 2-5% of the home’s purchase price. The closing costs include all the paperwork to buy the house, the title, and other expenses to get you a mortgage.
In some cases, you may be able to include the closing costs in the principal. This is good because you don’t have to save for it altogether. In this case, you’ll pay it in your monthly mortgage payments.
Side note: the down payment assistance programs sometimes also help cover closing costs.
Repairs and furnishing
You’ll also need to factor in the cost of furnishing and repairs/updates you may want to make to the home. Depending on the size and condition of the house, you could be looking at several thousand dollars in these costs.
Saving for a house doesn’t have to be complicated – with a little planning and discipline, you can reach your goal in no time!
2. Tighten your spending
When saving for a house, you must be mindful of your spending. Make sure you’re putting enough money away each month to reach your goal. Also, consider making some cutbacks in other areas of your budget. For example, you might want to reduce the times you order delivery or eat at a restaurant.
I recommend you analyze all your monthly expenses and find where you’re spending more money. Maybe it isn’t in food delivery, but it is in online shopping. Set a budget for yourself and stick to it. For example, if you’re currently spending $300 per weekend you go out, try to cut it down to $200.
If you commit to staying within your budget, you’ll see how much more money you’ll have at the end of the month. I can guarantee that you can greatly impact your savings by making small changes like these.
Once you have your spending under control, you can start to focus on saving. One of the best ways to do this is to set up dedicated savings account for your house fund and make regular deposits.
If you’re serious about saving for a house, these are just a few things you can do to make it happen. By cutting your expenses and boosting your savings, you can give yourself a much better chance of achieving your homeownership goals. Keeping track of your spending for a month will allow you to find other ways to reduce expenses.
3. Increase your earnings
There are many ways to make extra income; one option is to take on a side gig or a second job. Your side hustle can be something you enjoy doing. When coming up with ideas, start with activities you already like to do.
You could start a blog, walk dogs, or become a freelance writer or graphic designer. You could create a home repair business if you’re handy with tools. The possibilities are endless.
Putting any extra money you make toward your savings goal is important. Even if you can only save a little bit each month, it will add up over time. And the more you can save, the sooner you’ll be able to reach your goal of buying a house.
Still not convinced that starting a side hustle is worth your time? Let’s do the math. If you start a side hustle and put in 10 hours a week, making $18 an hour, you’ll have an extra $135 per week – approximately after taxes! Keep that up, and you’ll have around $14,000 for your down payment savings in just 24 months. That’s pretty impressive. What do you think?
4. Automate and optimize your savings
There’s no magic number for how much you need to save for a house, but you can do a few things to make the process easier. Automating your savings can help you reach your goal sooner, and optimizing your savings can help you get the most out of your money.
Start by setting up dedicated savings account for your house fund. Then, set up automatic monthly transfers from your checking account to your savings account. The amount you transfer should be based on your budget and your goal. For example, if you want to save $20,000 in two years, you’ll need to save $833 per month.
Once you have your automated savings plan, look for ways to optimize your
savings. For example, you can:
- Earn interest on your savings: Look for a high-yield savings account or a certificate of deposit (CD) with a competitive interest rate.
- Save your windfalls: When you get a bonus at work or a tax refund, add it to your savings account.
- Cut your costs: Find ways to save money on your everyday expenses to increase your savings.
By automating and optimizing your savings, you can make saving for a house more straightforward and effective.
5. Consult a Mortgage Expert
Consult a mortgage expert for informative and professional advice on how your home down payment will affect your mortgage. An excellent mortgage company will help you understand your options and work with you to ensure you get what’s best for you.
They can help you figure out how much you’ll need to put down based on the type of loan you’re looking for and the price of the home you’re interested in.
Once you have a down payment saved, you’ll need to start shopping for a home. Work with a real estate agent to find a property that’s within your budget and start going through the process of making an offer.
6. Keep your budget on track with a reliable agent
If you’re looking to save up for a house, one of the best things you can do is to find a reliable real estate agent. A good agent will help you to keep your budget on track and will be able to offer advice and guidance on the best ways to save.
BONUS: Our recommended home savings strategy
After analyzing all your expenses and setting your monthly budget, you should have a total of the costs each month. To make your saving process more effective, we recommend you try to have three times that amount in your account. For example, if you have $1,500 in monthly expenses, try to have $4,500 in your account. After doing that for 3 to 6 months, you can allocate a percentage to save for down payment costs and taxes for the house. By doing this, you’ll get to your goal faster than you think.
Our team at Real Estate Juan C can point you in the right direction regarding home savings tips until you find properties that fit your budget. Get in touch with us to learn more by clicking here.