Are you dreaming of owning a home of your own with a big backyard and a white picket fence? Purchasing a house can be expensive, but with a few savvy money-saving strategies, you can make your home ownership dreams come true — and maybe a little sooner than you think. We’ll show you how!
When you’re saving to buy a home, typically, you’re saving for the down payment. The down payment is the percentage of the home price you pay at closing and can vary tremendously depending on the house you’re buying and the type of home loan you are using. Experts often recommend a down payment of roughly 20% of the home price, though lower percentages are acceptable depending on several factors.
Whether you’ve been preapproved, have a precise budget you need to stay within to buy a house, or are doing some preliminary estimates, knowing your down payment goal is often a great place to start and can be a huge help as you begin your journey to purchasing a home.
Let’s be honest, budgets are far from exciting, but they are a necessary step if you want to save money to buy a house. After all, if you don’t know how much you’re spending, it can be hard to know how much you can save. Bills and other expenses add up, so a great next step as you start to save for your next home is to sit down and create a realistic budget that outlines your monthly income and expenses. Make sure this accounts for everything, including your partner’s or spouse’s income, necessities like rent and groceries, current debt repayments, and how much you spend on nonessentials, like entertainment and eating out. The more thorough your budget, the better you’ll know how much you can save and how long you will have to save before purchasing a house.
Once you have a budget in place, the next step is to see if there are any areas where you are currently spending that could be trimmed down. Usually, you will find this room to trim in your nonessential spending buckets. The best way to cut down on your spending in order to save money is to categorize your expenses. Break down nonessential spending into categories such as eating out, shopping, and entertainment, and see where you’re spending too much. Then, assess your finances, trim the fat, and make some hard choices.
Maybe you and your family choose to eat out less? Or maybe you are able to opt for biking and public transportation instead of driving to save on gas and parking expenses? Perhaps you cancel that gym membership you use twice a month and do at-home workouts? By categorizing your purchases, you can make your expenses and spending goals more digestible, which is a great way to help you save for a future home.
Once you’ve identified how much you can save, set up a separate savings account for your house fund. Putting that money aside into its own savings account, separate from the rest of your savings, is a great way to save for buying a house. It can help you see how much money you’ve saved and how much further you need to go, as well as prevent you from spending that money on other things.
Whether or not you choose to create a special savings account, it’s smart to put some of your monthly income aside and directly into your savings. If you do this already, contribute a little more. 3% more of your paycheck may not sound like much, but every little bit helps. Talk to your employer as well; most companies that offer direct deposit give you the option to select where you would like your money deposited. You can choose a percentage of your income to automatically be deposited into another account, taking out an extra step for you!
In addition to cutting expenses, a great way to save money for a house is to look for other sources of income and put aside the extra money you receive from these ventures. Many jobs pay bonuses during holidays and review periods. Consider setting aside these additional checks when you receive them and count them toward your homebuying savings. Thanks to technology and a flourishing gig economy, there are also plenty of ways to diversify your income and contribute toward your savings. Consider spending a few hours a week freelancing or consulting, if possible, and if your day job allows it. Drive for a rideshare service, shop and deliver meals for others, walk dogs, babysit — there is a long list of options to consider.
You also might consider a part-time job if you have the time. Get creative with it, have fun, and capitalize on the skills you’ve accrued over the years.
Whether you’ve bought a home before or are buying for the first time, saving money to purchase a home can be tough. But all it takes is a few smart savings strategies and financial adjustments to get you on your way. Check out some of our other posts to learn more ways to save money, and with a bit of dedication and focus, you can quickly save up for your dream home!
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