A new home is one of the most rewarding and costly purchases you'll make in your life. While the home buying process is exciting, saving up enough money for a down payment, closing costs, and a mortgage loan can be daunting. Fortunately, with a bit of careful planning, saving up the money to buy a home is not out of reach. Use the guide below for a few tips to help you save up for the home of your dreams.

How to Save For a New House

1. Determine How Much You Need

While it's true that many traditional mortgage loans require a 20% down payment on the cost of a home, there is a variety of both conventional bank and government-backed loans that allow you to purchase a home with as little as a three percent down payment. Once you've determined how much you can afford, speak with a mortgage lender to find out what loans you might qualify for. This will give you a realistic idea of how much money you need to save up. Also, remember to factor in two to five percent of the purchase price for your closing costs.

2. Automate Your Savings

Like your 401(k) plan, consider allocating a certain percentage or dollar amount of each paycheck to go directly into a savings or money market account dedicated to your down payment. This makes the process automatic and effortless, and it moves your paycheck to your savings account without you ever seeing it, thus removing the temptation to spend it elsewhere.

Many banks also offer automated "round up" programs that automatically round your purchases to the nearest dollar and send the difference to your savings account. Over time, these small accumulations can add up to savings that will help you purchase a home or make mortgage payments.

3. Save Your Windfalls

Periodically, you may encounter windfalls, such as income-tax refunds, cash gifts, bonuses or large commission checks, or even the sale of personal assets. While it's exciting to receive unexpected money, avoid the urge to spend it, and put it directly into your home savings account instead. By depositing these unanticipated funds into your savings account, you can speed up the savings process, sometimes by as much as a couple of years. 

When you're ready to buy a home, contact the professionals at Putnam 1st Mercantile Bank in Cookeville, TN. This locally-owned and -operated bank specializes in a variety of mortgage loans and savings programs designed to help first-time or repeat buyers save for and purchase the house they've always wanted. Contact them today at (931) 528-6372 to speak with a knowledgeable loan officer, or visit their website to learn more about their services.