Saving for a House? Let's Get Started
Saving enough money to buy a house might seem like scaling Mount Everest, but don’t let that stop you from taking the first steps. Once you get moving, you might find the peak more accessible than you expected.
Here’s how to make the climb:
1. Set goals to save for a house
Decide a total money target and a deadline for getting there. Here are the main things you’ll need to save for:
- The down payment. This is the upfront cash that a borrower pays when getting a mortgage to buy a home. Down payment requirements vary by mortgage type and by lender. Some may be as low as 3%. A down payment calculator can help you determine an amount to save.
- Closing costs. These are the fees you pay to finalize a mortgage and are typically about 2% to 5% of the loan amount.
- Moving and other expenses after you buy the home. Even if the house is in turnkey condition, you may find yourself making a surprising number of trips to hardware and home furnishing stores.
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Saving enough money to buy a house might seem like scaling Mount Everest, but don’t let that stop you from taking the first steps.
2. Scour your budget for ways to save
You don’t have to give up lattes — the cost of a coffee or two a week won’t finance a home anyway. But minimizing other expenses may help you save for a house faster. Here are a few places to look:
- Compare car insurance rates to get the best deal.
- Find out if you can save by bundling your cable and internet services or changing your cell phone plan.
- Refinance your student loans or auto loan to lower the monthly payments.
- Cancel subscriptions you’re not using.
To find other ways to reduce expenses, track your spending for a month to see where your cash goes.
3. Automate and maximize savings
Set up automatic transfers from your checking to savings accounts, so the money is out of reach for immediate spending.
The stock market is too volatile for short-term savings — less than 10 years — so when saving for a house, keep your money in a high-yield savings account, a money market account or certificates of deposit instead.
The CDs should be timed to mature just before you want to buy a house. Maximize your savings by getting the highest interest rates possible.
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Set up automatic transfers from your checking to savings accounts, so the money is out of reach for immediate spending.
4. Save raises and windfalls
Transfer tax refunds, bonuses, raises and any other financial windfalls to savings before you get a chance to spend them. These will boost both your savings and motivation, and may soon put homeownership within sight.
5. Earn some extra money
Look for ways to make some extra cash when saving up for a house, such as doing freelance work online, making deliveries or trading in old phones and electronics.
Just beware of scam “opportunities” that ask for upfront money or financial information. Check out any companies before hopping on board, and avoid side hustle tax traps.
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Transfer tax refunds, bonuses, raises and any other financial windfalls to savings before you get a chance to spend them.
6. Track your progress and keep going
Check your savings progress at least every month. Slow and steady progress is worth celebrating. Post a savings chart on the refrigerator or photos of your dream home to keep you inspired.
Bottom Line
The process of buying a home may be demanding, but it can also be one of the most rewarding ventures of your life. Remember, patience and a positive attitude will go a long way in making this journey a memorable and exciting one. Happy home hunting!
If you have questions about the loan process or how to get started, feel free to contact us
One of our Loan Officers will be pleased to help you.
This article was originally published by Barbara Marquand in www.nerdwallet.com
