Owning a home is a big dream for many people. For the average person, it’s also the most expensive purchase they’ll ever make, and saving for a down payment can be a big challenge. However, with the right mindset and savvy saving habits, the goal is achievable. Here are a few tips on how to start building up funds to buy a house.
5 Tips to Follow When Planning to Buy a House
1. Estimate a Workable Budget
Saving up to buy a house takes time, so don’t be hasty in your decisions. Know how much you can afford to pay for a mortgage, property taxes, and home insurance, on top of the household expenses. Keep in mind that your monthly mortgage will depend on the amount you paid as a down payment. Ideally, you should put down at least 20% of the purchase price, but depending on your credit score, this can be reduced to 10%. Get preapproved for a loan, so you’ll have a rough estimate of mortgage payments with regard to your monthly income to determine a budget.
2. Set a Goal
Figure out the upfront and ongoing costs of owning a home. Your initial goal is to save up for a down payment, appraisal, home inspection, and closing costs. Once you’ve figured out how much you need to save, set a time frame for achieving the goal.
3. Track Your Expenses
Make sure to draft a realistic budget—one that won’t deprive your necessities. Track your spending and decide on which expenses you can forgo. Start by cutting down on restaurants, subscriptions, big purchases, travels, and other luxuries.
4. Reduce Debts
If you have existing debts, pay them down first before taking on another loan. Doing so relieves the financial pressure on your income and allows you to have a better interest rate on your mortgage. Once you’ve settled some of the debts, you’ll be able to save up faster.
5. Save Windfalls
Put away periodic windfalls like income tax refunds, bonuses, monetary gifts, and sales proceeds from assets to your savings instead of spending them. Aim to pay yourself first rather than save what’s left of your money. To make it less tempting to spend what you’ve saved, open a separate bank account for any savings.
Begin your journey toward your dream home by saving smartly. When you’re ready to buy a house, work with the professionals at EXIT Realty Nexus in Coon Rapids, MN. Their licensed, experienced real estate agents have in-depth knowledge of the local market, helping clients find a place they can call home. Call (763) 548-1400 or visit them online to learn more about their property listings.