Saving money for a house can feel like an insurmountable goal. A down payment and closing costs will be in the thousands. For a traditional mortgage, the target number is 20 percent of the sale price for the down payment and another estimated 5 percent toward closing costs. If your dream home is $200,000, expect to need $50,000 saved.
It seems a bit daunting, doesn’t it? The Consumer Financial Protection Bureau reports, “People often put off saving for [important] goals because they feel like they don’t have enough money to save or they are busy struggling to make ends meet today. They feel like they can’t think or worry about saving for goals, large purchases, or even life events in the future. This can create financial challenges in the future.”
So, how do you start saving the tens of thousands of dollars needed for a home purchase? Here are our tips for saving money for a house.
Set a Goal: Decide how much money you need for the house you want, and set a date to achieve this goal. Moreover, ensure your goal is reasonable, It may take you five years to save $50,000.
Create a Plan: Convert your goal into yearly, monthly, and weekly financial targets. A $178.58 weekly goal is easier to achieve than the lump sum of $50,000.
Cut Spending: Reduce spending on as many items or services as you can. Cut back your cable television from the premium package to basic. Reduce your phone from unlimited calling to a fixed number of minutes. Limit the number of times you eat out.
Boost Savings: Take the money you have saved and invest it into a savings account, certificates of deposit, mutual funds, and savings bonds. Banks and credit unions offer financial products that are safe and boost the value of money saved.
Increase Income: Consider taking a part-time job. The added income will help you to save faster, and will help with other unexpected expenses like automobile repairs.
Revise Goals: If the amount you are saving for a home doesn’t make sense, or your life’s circumstances have changed, adjust your goals. Your goals are not etched in stone. Adjust them so they make sense for you and your family.
If you already saved money and plan on purchasing your first home, or just need more information, please contact us.