Buying a home is an extensive process that requires years of dedicated budgeting and saving. Most prospective homeowners are intimidated by the amount of money that homebuying demands. Yet, this process does not have to be as burdensome as you might expect. Using the guide below, you can quickly and easily achieve your desired savings and be on your way to your dream home in no time.
Table of Contents
1. Determine Your Savings Goals
The amount of money you plan on saving for your home depends on the type of house you’re aiming to buy. Secondly, your buying power will be directly influenced by the mortgage loans you qualify for. (Your ideal budget maybe around $300,000, yet you may only qualify for $200,000. Your borrowing eligibility is, essentially, the deciding factor in your final budget.)
In any case, you’ll need to do two primary things:
- Use a mortgage affordability calculator to get an idea of what your monthly payments will be.
- Save for a 20% down payment.
Some lenders will allow you to submit less than 20% for your house down payment. It would be best to consult with a mortgage professional to identify such lenders. Checking your credit score and discussing this information with the mortgage professional will also help you get an idea of what amount you might be eligible for, so you can start saving more precisely.
2. Develop a Savings Schedule
Once you’ve established your financial goals, it’s time to put your money where your mouth is and start saving. Although it may seem like a massive undertaking, the entire process is driven by small incremental contributions.
Be realistic in determining how much you can spare per month. You shouldn’t allocate so much to the homebuying budget that you can’t afford to live. Yet, you also should avoid saving so little that it hardly makes a difference in a year or two. Determine a healthy amount of money that you can regularly dedicate to your house budget and set up an automatic payment schedule into a separate savings account. (The less you have to think about it, the easier it will be to save.)
3. Get Creative with Your Savings Techniques
Saving up for your new home doesn’t have to come from your existing budget exclusively. There are many things you can do to increase your saving capacity, such as taking on a side job, selling unwanted or unused possessions, and sacrificing luxuries likeexpensive vacations. Plus, any holiday bonuses or overtime pay you earn from work can be added to your savings at any time. Expanding your options in this way may ultimately help you achieve your savings goals much sooner.
4. Regularly Review Your Budget
Your finances are not static, so it’s important to review them periodically and adapt your saving plan if necessary. For instance, work may slow down in some months compared to others, so you may need to reduce your contributions to compensate for the temporary setback. Small behavioral changes such as refusing to eat out or forgoing unnecessary entertainment subscriptions can avail more funds to dedicate to your home savings, too.
As you go over your progress in saving for a new home, consult with a mortgage professional. They’ll guide you in making the best financial decisions for your homebuying journey and ensure you reach your savings goals sooner rather than later. Get in touch with a qualified mortgage professional today to get started.