Over 656,000 houses sold in the U.S. in June this past year alone. That's up from 618,000 the previous year.
Are you thinking of becoming a homeowner yourself? Before you do, it's important to make sure you have money in the bank. Otherwise, you'll have to rely heavily on loans, which could impact your credit score.
Instead, keep reading to learn how to save for a house. With these tips, you can start saving to buy a house without hurting your credit. Start saving with these seven tips before moving into your brand new home!
1. Determine Your Budget
Millions of Americans are spending more than 50% of their earnings on their home purchase. Meanwhile, the median home value in the US is about $226,300. That price may differ depending on where you are looking to buy from. For example, AIken SC Real Estate prices could be considerably less than houses in other states. By doing your research on the housing market depending on location, you can decide on a realistic budget and place to settle down.
Before you learn how to save for a house, it's important to establish your home buying budget. Otherwise, you could end up falling in love with a home you can't afford.
How much can you comfortably afford to spend on your new home? First, take a look at your earnings and expenses. You'll also need to calculate your total home costs, which include:
Together, these factors can cost you several hundred dollars in additional expenses.
Try to avoid spending more than 25% of your monthly take-home pay on your mortgage payments. Spending too much on your monthly payment might make it difficult for you to save for emergencies.
Your monthly take-home pay will help cover insurance, taxes, escrow, and your homeowner's association fees.
Once you have a price range you feel you can afford, you'll need to decide how much your down payment will cost. Most prospective homeowners calculate a 20% downpayment to avoid paying private mortgage insurance. If you have to pay private mortgage insurance, it could add hundreds to your mortgage's initial total.
Make sure your housing costs don't surpass a third of your income.
2. Pay Off Your Debts
When saving for a house, it's important to pay off your debts as soon as possible.
These can include credit card payments, student loans, and car loans. The total of your debts could amount to how much you need to spend on your mortgage. Paying off your debts as soon as possible can make saving to buy a house easier in the long run.
You can use the debt snowball method to pay off your debts.
First, make a list of all your debts in order from least to greatest. Then, focus on paying off the smallest debt. Once you knock that debt out, take on the next-largest one. Continue with this process until you've paid your debts off.
The snowball method allows you to pay one debt off after the next. Once you pay off the smallest debt, you can allocate that money toward your new home. By alleviating some of the financial pressure from your shoulders, you'll also find it's easier to secure a better mortgage rate.
Make sure to work toward paying off your debts as soon as possible. Once the debts are gone and you're saving more, you'll find it's easier to find your dream home.
You can find your next home in South Boston by exploring these homes for sale.
3. Push Pause on Retirement
If you're close to retirement, you can skip this step. Otherwise, consider putting your retirement savings on a temporary hold.
Many young members of the workforce are already putting money toward a retirement plan like an IRA or 401(k). You can temporarily divert that money toward your savings. Using this short-term strategy can make learning how to save for a house a much faster process.
4. Imagine Your Mortgage
Write down how much you expect to pay for your mortgage. Then, start living as if you're already paying those monthly costs.
The sooner you save, the sooner you'll have the nest egg to spend on your new home.
Start saving this money into a separate savings account. Think of your mortgage like any other bill you can't skip each month. Starting this process before you start looking for a new home will help you adapt to paying for a large mortgage.
At the same time, you're also saving toward your new home.
5. Start Saving
Don't wait until the end of the month to determine how much money you can save. Instead, start saving as soon as possible.
If you want to get serious about saving for your new home, determine how much you'll need to put into savings each month. Then, try to add a little more to that total every week or so. While this process can take time to adapt to, it can help you save a lot toward your new home.
Some people decide to dip into their savings accounts. To avoid this temptation, make sure to create a separate account for your home. You can also use an online bank, which oftentimes offers better interest rates.
6. Cut Expenses
Making an effort to cut down on expenses can give you more money you can set aside for your new home.
First, take a look at your money expenses. Separate your expenses into categories like entertainment, food, rent, and transportation. Which expenses can you reduce?
For example, you might want to end your monthly subscription services for a while. That can include Birchbox, Blue Apron, Hulu, Netflix, and Amazon Prime.
Do you eat out a lot? Try to make a monthly grocery list for yourself. Then, stick to that list and cook at home instead of eating out.
Reducing your expenses can help you save enough money for your down payment.
7. Get a Side Hustle
If cutting your expenses isn't enough while you're saving for a house, consider getting a side hustle. The gig economy is always offering new opportunities.
For example, you can walk dogs, deliver meals, or start tutoring. Every little bit helps when you are saving money towards buying a home or securing a smart mortgage.
Then, set aside the money you make toward your new home or real estate property!
Home, Sweet Future Home: How to Save for a House
Ready to make a move on your first house? Make sure to use these tips on how to save for a house first. With these tips, you can start saving for a home and mortgage without hurting your credit score.
Want to avoid other financial mistakes in the future? We're here to help. Explore our Real Estate resources today for more helpful home buying financial tips.
How much can you comfortably afford to spend on your new home? First, take a look at your earnings and expenses. You'll also need to calculate your total home costs, which include:
- Property taxes
- Home insurance
- Mortgage
Try to avoid spending more than 25% of your monthly take-home pay on your mortgage payments. Spending too much on your monthly payment might make it difficult for you to save for emergencies.
Your monthly take-home pay will help cover insurance, taxes, escrow, and your homeowner's association fees.
Once you have a price range you feel you can afford, you'll need to decide how much your down payment will cost. Most prospective homeowners calculate a 20% downpayment to avoid paying private mortgage insurance. If you have to pay private mortgage insurance, it could add hundreds to your mortgage's initial total.
Make sure your housing costs don't surpass a third of your income.
2. Pay Off Your Debts
When saving for a house, it's important to pay off your debts as soon as possible.
These can include credit card payments, student loans, and car loans. The total of your debts could amount to how much you need to spend on your mortgage. Paying off your debts as soon as possible can make saving to buy a house easier in the long run.
You can use the debt snowball method to pay off your debts.
First, make a list of all your debts in order from least to greatest. Then, focus on paying off the smallest debt. Once you knock that debt out, take on the next-largest one. Continue with this process until you've paid your debts off.
The snowball method allows you to pay one debt off after the next. Once you pay off the smallest debt, you can allocate that money toward your new home. By alleviating some of the financial pressure from your shoulders, you'll also find it's easier to secure a better mortgage rate.
Make sure to work toward paying off your debts as soon as possible. Once the debts are gone and you're saving more, you'll find it's easier to find your dream home.
You can find your next home in South Boston by exploring these homes for sale.
3. Push Pause on Retirement
If you're close to retirement, you can skip this step. Otherwise, consider putting your retirement savings on a temporary hold.
Many young members of the workforce are already putting money toward a retirement plan like an IRA or 401(k). You can temporarily divert that money toward your savings. Using this short-term strategy can make learning how to save for a house a much faster process.
4. Imagine Your Mortgage
Write down how much you expect to pay for your mortgage. Then, start living as if you're already paying those monthly costs.
The sooner you save, the sooner you'll have the nest egg to spend on your new home.
Start saving this money into a separate savings account. Think of your mortgage like any other bill you can't skip each month. Starting this process before you start looking for a new home will help you adapt to paying for a large mortgage.
At the same time, you're also saving toward your new home.
5. Start Saving
Don't wait until the end of the month to determine how much money you can save. Instead, start saving as soon as possible.
If you want to get serious about saving for your new home, determine how much you'll need to put into savings each month. Then, try to add a little more to that total every week or so. While this process can take time to adapt to, it can help you save a lot toward your new home.
Some people decide to dip into their savings accounts. To avoid this temptation, make sure to create a separate account for your home. You can also use an online bank, which oftentimes offers better interest rates.
6. Cut Expenses
Making an effort to cut down on expenses can give you more money you can set aside for your new home.
First, take a look at your money expenses. Separate your expenses into categories like entertainment, food, rent, and transportation. Which expenses can you reduce?
For example, you might want to end your monthly subscription services for a while. That can include Birchbox, Blue Apron, Hulu, Netflix, and Amazon Prime.
Do you eat out a lot? Try to make a monthly grocery list for yourself. Then, stick to that list and cook at home instead of eating out.
Reducing your expenses can help you save enough money for your down payment.
7. Get a Side Hustle
If cutting your expenses isn't enough while you're saving for a house, consider getting a side hustle. The gig economy is always offering new opportunities.
For example, you can walk dogs, deliver meals, or start tutoring. Every little bit helps when you are saving money towards buying a home or securing a smart mortgage.
Then, set aside the money you make toward your new home or real estate property!
Home, Sweet Future Home: How to Save for a House
Ready to make a move on your first house? Make sure to use these tips on how to save for a house first. With these tips, you can start saving for a home and mortgage without hurting your credit score.
Want to avoid other financial mistakes in the future? We're here to help. Explore our Real Estate resources today for more helpful home buying financial tips.
