The median listing price for a home in the United States is approximately $227,000. The trouble is . . . you’re not anywhere near that figure. That’s why you’re here: you’re wondering how to save money for a house.
There are a number of tips you can utilize. We’re going to discuss them in detail below. So, without further ado, here’s how to save up to buy a house.
One of the problems that many individuals face is not quite knowing where their money is going. Sure, they’re spending it on something, but is that “something” important? Or, maybe, they’re just throwing it down the drain?
A good way to gauge this is to create a detailed budget. By accounting for each of your expenses in a spreadsheet, you can determine exactly where your money is going. This will provide you with a clearer picture of your financial situation, helping you to determine just how much you can save every month.
Odds are, there are some expenses that you can cut out. You might even be able to opt for a cheaper apartment or buy cheaper groceries. A budget will illuminate these possibilities, putting you in a proper position to make a change.
First and foremost, if you want to save up money for a house, you have to do away with non-necessities. Sure, a $4 coffee might not seem like much, for example, but when you could just as easily get one for a dollar or two, you’re essentially throwing away $15 to $20 a week. $15 multiplied by 52 weeks equals $780, and that’s on just one expense.
Throw in other non-necessities like cable and an expensive gym membership and big meals, and you’re wasting several thousands of dollars a year. That’s a lot of wasted money when you’re saving up for a house.
Yes, doing away with expenses such as these can feel a little painful (mentally, that is). But if your goal is to be a homeowner, it will be well worth the effort.
Generally speaking, if you have debt, you’re advised to pay it off prior to applying for a mortgage. Now, this doesn’t mean that you should attempt to pay off your $50,000 of student loans. But it does mean that you should eliminate credit card debt and car payments.
The more debt you pay off, the lower your mortgage interest rate will be. The lower your interest rate, the cheaper your monthly payment will be, and the less you’ll have to save up overall.
You’re making decent money at your full-time job, but you’re not able to set much aside. As such, your savings efforts have been slow going.
What can you do to increase your monthly income? It’s as simple as picking up a side gig. Making a few hundred extra dollars per month would enable you to save thousands of dollars over the span of a year. For instance, if you could add just $300 dollars to your monthly income, you would bring in $3,600 additional in yearly gross income.
Now, you might be wondering: what types of side gigs are out there? There are quite a few. You could get into freelance writing, resell items on eBay, become a dog walker, drive for Uber, or do a variety of other things.
Remember: you don’t need to make much. Any money that you make from this gig will be going directly to your house (except for taxes, of course).
Regardless of how you’re bringing in the savings for your house, you’re advised to put it in a high yield savings account. And you shouldn’t just put it in the same savings account as the rest of your money. You should put it in a separate account, one that’s dedicated solely to the expenses of your future home.
A high-yield savings account is beneficial because it will accrue interest over time. Utilizing a separate account is beneficial because it prevents you from accidentally spending money that’s meant for your home. In other words, it reduces the risk of frivolous spending.
The highest-yielding savings accounts are those that exist solely online. In good economic times, some of these carry interest rates of around 2%, making them substantially more beneficial than those provided by brick-and-mortar establishments.
Another way to save up money for a house is to make use of downpayment assistance grants. These grants essentially provide home buyers with free money, helping them to establish suitable down payments so that they can meet mortgage requirements.
These assistance grants are provided by several different entities. Some are provided by states, some are provided by cities, and some are provided by private companies. While some require you to pay small amounts of interest over time, many come interest-free.
If you’re interested in utilizing such grants, speak to a mortgage lender. Your lender should be able to help you find something appropriate for your situation.
Not only do you need to save up for a downpayment but for closing costs as well. What you might not realize, however, is that there are credits available for these expenses.
Some states and municipalities provide these credits. However, if they’re not provided in your area, you might be able to receive them from your mortgage lender. Make sure to ask before finalizing your mortgage, as you might be leaving free money on the table.
Now that you know how to save money for a house, you might be interested in utilizing closing cost credits or a downpayment assistance grant. If so, you’re in the right place. We here at Market Place Mortgage can help you.
Contact us today for a free consultation!