The earlier you start saving for a house, the more you can get out of your money. Of course, not everyone has the luxury to start saving for a home at a young age. But even those who are in their early to mid-20s should be able to start putting away some money from each paycheck to help the down payment process.
To save up for your dream house, it’s important that you lay out your goals and set a plan in place to achieve that. Your future house might not be your first investment, and you need to know what you’re spending money on now before you can start saving for the future.
For example, if you’re currently paying rent and utilities, why not take those savings and put them towards your dream home? What about eating out frequently or hitting up happy hour with your friends? You should work to reduce these expenses, thus increasing your savings.
Everyone has different financial goals for their money. But one of the most common goals people have is purchasing a home. Whether it’s an apartment, townhouse, condo, or duplex, homeownership can be one of the most rewarding accomplishments in life. So, here’s how you can start saving:
Set a ballpark figure of how much you need to save
It’s important to find out how much money you need to save for a house. There are a few steps in the process, and you need to know how much it’ll cost. For example, you should calculate the down payment, closing costs, and moving expenses before giving yourself a total number to work with when saving up for your new home.
This means your monthly saving goals need to be realistic, too. While you can save money on your rent or utilities by putting extra cash towards your dream house, you also don’t want to make it more difficult for yourself. Spending less on lattes and brunch can help you put a few extra dollars away each month, but not if you’re going broke in the process.
Take the first step and put your money in a savings account
It’s time to open up a savings account and start putting away some cash from each paycheck you get. This isn’t just about finding out how much money you need to save but following through with that goal by setting up separate accounts for saving.
Consider opening a high-yield savings account at a different bank or credit union. You can still use your debit card and checking account, but this way, you’re maximizing the interest rate on that money until it’s time to close that savings account and put that money towards the down payment of the house you bought.
It’s also important to set up automatic transfers from your checking account to your savings. This way, you don’t even see the money, and it feels like it never existed in the first place. Set up an automatic transfer for $50 or $100 a week so you can start putting away cash for your future house.
Find out how much house you can afford
Before considering houses that meet your budget, you have to know just how much money you have. This process is called prequalification, and it helps determine exactly how much house you can afford. You can do this by consulting with mortgage firms or banks, so they can crunch your numbers and find out the best loan for you.
If you’re not sure what kind of payment fits into your monthly budget, consider finding out what an interest rate feels like first. Calculate the current average mortgage rates in your area, and start putting away a 20% down payment. This will give you a good idea of what kind of house you can afford with the monthly payment you’ll make.
Decide your price range
Your budget isn’t just about knowing how much house you can afford; it’s also about where that money comes from. Yes, that 20% down payment is important, but you also have to consider that monthly mortgage rate.
Your budget will be all over the place if you’re only saving up for a house because it seems like the next big thing to buy. But there are other financial goals out there, too—such as taking a vacation or upgrading your car—so you might want to save up for those things first and then come back to your house.
Consider how much you can afford monthly based on what’s left over after paying other expenses. This includes utilities, student loans, and credit card bills; plus, it should be a little extra for emergencies.
Buying a house is the ultimate American dream, but it’s also one of the most expensive purchases you’ll ever make. And if your goal is to own property in today’s market, there are many things you need to know about saving money for that house. So, you best start saving for your dream house ASAP.