A recent survey found that 84% of Americans have stressed that buying a home is a priority for them, and 27 million are looking to buy in the next 12 months.
Coming to the conclusion that you’re ready to buy your first home isn’t easy. You have to know that you’re happy where you are and ready to settle down, what you’re looking for in your future property, and how much you’re willing to spend.
You also need to have a plan for saving money for a house, which is clearly the biggest deterrent to homeownership. How can you get your finances in order so that you can buy your dream home without a hitch?
Read on for 9 tips for saving money for a house that you can start today.
1. Figure Out How Much You Can Spend on a House
One of the many appeals of homeownership is the prospect of paying less each month on your mortgage than you would on rent. However, there are more home buying requirements that you need to prepare for beyond that monthly mortgage payment.
Of course, the downpayment is what you need to start saving for since this is the biggest chunk of cash you’ll need to dish out. Ideally, you want to put down about 20% of the overall cost of the property.
However, don’t forget to factor in things like property taxes, insurance, and possible HOA fees. A good rule of thumb is to spend no more than 28% of your income on your housing expenses.
2. Settle on a Timeframe
Once you know how much you can spend on a house, it’s time to figure out a reasonable timeframe. How much can you feasibly save each month? How many months of saving will it take to hit that 20% downpayment mark?
3. Decide Where to Keep Those Savings
It may seem tempting to put your savings into an investment stock since this is a possible way to maximize your cash. The problem is that this is also a way to lose your cash, something you can’t afford to do when you’re working within a set timeframe.
Instead, you may want to settle on a standard savings account. Find a bank that offers great interest on savings and start building up your money in a safe, no-risk space.
4. Take a Look at Your Current Budget and Slash It
Chances are, you’re not currently saving the amount of money you need to each month in order to stick to your timeframe. Take a close look at the way you’re spending money now. Find ways to cut down that budget, whether it’s by dining in more, skipping a vacation or two, or cutting out some vices like smoking or drinking.
5. Go Automated
Not a natural saver? Cut out the option of keeping a little more cash for spending than you said you would. Look into your bank’s automated system and see if you can set up monthly, automated transfers from your checking account to your savings account.
While you’re adjusting to this new system, make sure you’re keeping a close eye on your bank account. The last thing you want is to overdraw your checking account because you’re not accustomed to transferring a big chunk of it to savings.
6. Hang On to Your Windfalls
Does a work bonus usually spell “shopping spree” to you? Do you like to take your annual tax refund and spend it on a nice dinner or exciting night on the town?
It’s time to look at those windfalls as a chance to expedite your saving timeframe. At the very least, half of every windfall should go straight into your savings account, no questions asked.
7. Don’t Forget About an Emergency Fund
Unfortunately, life doesn’t stop throwing curveballs even when we’re in the midst of planning our futures. If you don’t want to have to pull emergency funds from your home savings, you’re going to want to establish a separate emergency fund.
If possible, try to keep at least $1,000 in your emergency fund. This can be used for unexpected car payments, uncovered medical bills, and other surprising (but unavoidable) expenses.
8. Tackle Your Debt
If you have debt from, for example, credit cards or student loans, you may want to tackle that, first. In other words, go back to your timeframe and factor in the amount of time it will take to pay off (or cut into) your debt.
Why? When you’re applying for your mortgage loans, lenders are going to look at your debt-to-income ratio. The more money you owe in debt, the more they’re going to view you as a liability. As a result, they may not offer you the loan or, alternatively but no less positive, they’ll give you the loan with a massive interest rate tacked on.
9. Consider a Side Hustle
We’re not the biggest fans of answering the question, “How do I save more money?” with, “Make more of it.” However, picking up a side hustle is a feasible option for some.
Ultimately, don’t look at a side hustle as a way to buy a bigger or more expensive property. Side hustles aren’t always stable and you may find quickly that it’s not a sustainable option for you. If you are considering a side hustle, look at it as a way to pad some of that spending money you’re losing to your savings account, not as a get-rich-quick method.
Saving Money for a House Takes Planning
Saving money for a house is something that nearly all Americans will tackle at some point in their lives. The important thing is to remember that it takes planning. The best way to approach buying a house is with honesty about what you can afford and the patience to save up a downpayment.
Looking for more information on homeownership? Take a look at our articles on gardening, decor, and how to turn a property into your very own oasis.