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5 Smart Ways to Save Money for a House
Posted by intodoorsblog — December 19, 2020
Buying a home is one of the most significant milestones for most Americans, and it is usually the most significant purchase many of us make. The main obstacle that hinders people from fulfilling this milestone is the amount of money that is required for purchasing a home. No matter what mortgage plan you choose, you’ll have to put some money as a down payment. Moreover, there are several other things you need to save for. These things include closing costs, inspection, appraisal, and in some cases repair costs.
Everything could be a lot to take on, and it is prudent to start saving before you can make a move. The entire process of saving money can seem tiring, but don’t worry – there are a few ways you can seep things up.

Smart Ways to Save Money for a House

While I understand it’s tricky to save up thousands of dollars when you’re already managing expenses such as rent, utilities, and student loans, it is still possible. So, if you are hoping to be a homeowner, follow these tips on how to save money for a house.

1. Start with Understanding the Down payment

This is the money you’ll pay to close the deal when buying a house. It can be borrowed from the bank in the form of a home loan or might come from your savings over the years. One thing to note is that some portion of your down payment should come from you directly. It usually acts as insurance to your lender, proof of your commitment. Making a sizeable down payment is advantageous to you as the buyer because you can select a shorter mortgage term, which will ultimately reduce your debt.
Many ask about the amount they should put into their down payment, but the answer to this question is varied. The more you can put towards the whole amount, the better, but if you can’t clear it, put in as much as you can afford.

2. Know What You Can Afford?

No matter how hard you try, the amount of money you can save in the coming years strictly depends upon your earnings. Therefore, you must have an idea of how much you can spend while buying a home.
If, for instance, you want to buy a $600,000 home in six years and your targeted down payment is 20%, you will need to put aside $120,000, in addition to closing costs. To save this amount, you’ll need to save at least $1500 a month for the next five years. Now, in this case, you need to either increase your monthly earning to match the $1500 per month mark or rethink the type of house you want to go after.

3. Start Working on a Side-Hustle

Most people are utilizing every penny they earn towards running their day-to-day expenses. A time comes when they no longer have additional income left to save. This is where you need to start working on another income source. Now it doesn’t have to be something huge. You can start working on your passion part-time and try to make a decent amount from it. Luckily, the internet is full of options that can help you save additional money in no time. After all, this year has been about the gig economy!
Make sure to stack the money earned from your side hustle in a separate savings account. By doing so, you’ll be able to draw a line between the money used for daily expenses and the money that is going to help you buy your dream home.

4. Try to Get Your Debt Under Control

Debt is what holds most people back from becoming homeowners. It makes saving difficult as a chunk of your earning goes towards repayments. At the same time, the debt load also makes it tough to qualify for a mortgage. If you have debt, do everything in your power to control it – even if it means using cash at most places.
For those who have student loans at higher rates, refinancing them to lower the payments can be a good idea. Similarly, if you have credit card debt at a high-interest rate, consider paying off as much as you can and then transferring to a low-interest card.

5. Look Towards the Government for Help

The US government and the state of California offer different programs that help first-time homebuyers. For instance, the Federal Housing Administration (FHA) loan allows you to put only 3.5% down. But to avail of this, you need to have a credit score of 580 or higher and a debt-to-income ratio that is below 43%. For buyers with a credit ratio between 500-579, you have to put down 10%.
Similarly, FHA loans present a good option for those who can’t come up with a sizeable down payment. Most of the time, these loans require a PMI (Private Mortgage Insurance). It includes upfront payments, monthly payments, and are usually at higher interest rates. At the same time, there’s a limit to the loan amount you can borrow.
If you are an active or a former member of the military, you get access to the Veteran Affairs (VA) loan to finance a house purchase up to $484,350 in 2019. The best thing about this loan is that it requires no down payment or mortgage insurance. However, it comes with strict guidelines such as abiding by the minimum property requirements standard.

Final Words

Saving for a house doesn’t have to be a difficult task. Many people have done it before you so you can look to their actions to know if you’re on the right path. It’s essential to establish a firm plan and follow through with it, although any obstacles life might throw at you. You shouldn’t use the money you’re saving for your down payment for anything but its intended purpose. Stick to the goals you set for yourself, and you’ll be well on your way to successfully owning a home.
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About Author:
Anthony Haulcy

Award-Winning, Multi-Million Dollar Producing Real Estate Broker and Mentor to the Masses. 
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