Saving for a house is no simple task. If you’ve never bought a home before it can seem daunting. How much should you save? What type of house can you afford? Are there any ways to speed this process along? Those are all good and necessary questions to consider when saving for a house. Crucially though, it’s not as scary as it may seem once you break it down.
Don’t be left in the dark. Use these 5 tricks when you start saving for a house to set yourself up for success:
- Talk with a real estate agent
- Determine goals
- Open a savings account with no fees
- Get a part-time gig
- Set up automatic transfers
Talk with a real estate agent
Most people would recommend that you determine your goals first and then start saving. While this is sound advice there is a caveat. Most people don’t know the process of how to buy a home. A lot of people don’t know whether or not they can even afford a home. Some people (such as Dave Ramsey) recommend saving up 20% of the value of the home. On the other hand, it may be more realistic for you to apply for an FHA loan, which requires you to only put down 3.5%, due to circumstances out of your control.
Meeting with a realtor first helps you gain basic knowledge not only about saving for a house but the market you are buying. They can help you find a lender and point you to the right neighborhoods so your home will grow in value. Realtors can help you nail down a price point that you are comfortable with. In turn, this helps you with our next trick.
Now that you know about your local housing market and the ideal house you would like to live in, you can start to formulate a plan. Write down a list of items that are most important to you in a home such as:
- Garage access
- Open kitchen
- Back patio
- 3 bedrooms
Now that you know housing prices, you can get a realistic picture of what is financially achievable for you. In addition to that, you can also gauge how long it will take to save up. You can then determine a reasonable price point you need to save up for.
However, here’s an important note to remember. Your credit score affects your mortgage rate. Any goals you set about saving for a home should also include paying down debt and improving your credit score. Improving your credit score is only going to help you get a better deal on your home. Especially if you are a first time home buyer.
Open a savings account with no fees
You need to stop spending money and start saving it. However, don’t just store that extra money in a sock drawer. Put it in a savings account that has no fees and is a high-interest savings account. A high-interest savings account will allow your money to grow year-over-year. That’s great because it takes the average American over 6 years to save enough money for a down payment. You want that money working for you not against you.
Also, why lose money to fees when you don’t have to? Choose a bank that won’t charge you for saving your money.
Get a part-time gig
If you want to save up for a house faster, then getting a side hustle is your best bet. If you are married and both of you get a part-time job, you could possibly save well over your estimates. However, before taking any part-time job here are a couple of tips:
- Pick a part-time job or internship in an area of work you may want to transition to.
- Act as if you cannot spend this extra money you are saving. Deposit it directly into your savings account.
- Try to find a job that won’t burn you out. Have a set goal to work towards or a certain date you will leave by.
Set up automatic transfers
Kind of a “set it and forget it” approach. Having automatic transfers on payday when saving for a house can help you stay on track with meeting your goals. Also, it forces you to pause and think before you transfer money back from your savings account. Never be tempted to spend money that you were supposed to be saving with automatic transfers.
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