The thought of buying a home can be daunting. They cost hundreds of thousands of dollars and it starts with a large down payment. It also doesn't help that so much of our typical "american dream" is tied to being a homeowner. It feels like too much, but it doesn't have to be. If you have a good plan and know a little more about real estate, you will find that saving for a down payment is quite feasible. Here is your simple guide on how to save for a house.
Check your budget
No one really enjoys budgeting, but if you are serious about saving for a house, this is the first step. Take a look at all your income and expenses closely . It may not be the most entertaining way to spend an afternoon, but until you have accounted for every cent, saving for a down payment will prove difficult.
You'll want to divide your expenses into two categories – mandatory and discretionary. Obligatory expenses are things like rent, insurance and food. Discretionary would include netflix and other things you can do without even if you don't want to!
Once you have made this list, you can look for where you can make cuts to save for that down payment. However, there are a few more steps that will make the last part of budgeting less painful.
Calculate some mortgages
The second step in your plan is to find out how much money you really need for your house. It is best to compare the mortgage with what you are already paying in rent. If your rent is $1500 a month, you can afford a mortgage payment in the same stadium. You can also find many mortgage calculators online to help with this part.
As part of your price research, there are a few additional steps that can make a big difference. If you check your credit score, you can find out what interest rates to expect . You can even try to get pre-approved for a mortgage. Then you know exactly what your options are.
It is important to be able to estimate property taxes and insurance and add them to your monthly mortgage payment. This tells you exactly how much is coming out of your pocket, and with all this you can set a price limit for your home purchase. For your down payment, save 10 to 20 percent of the total price of the house.
Weigh your payment options
Without assistance, they should expect to require a 20 percent down payment for each house. If this is your first home, there are several resources that can help you significantly lower your down payment.
The first is the federal housing agency . This is a government program that helps first-time home buyers. FHA loans typically have lower down payments and fixed interest rates, and when you explore these loans, you get real numbers that help you set your savings goals.
It is also worth mentioning that the FHA offers assistance in financial planning. If you are new to buying a home, working with the FHA will help you get a good idea of all the little things you need to know about the process.
Outside of government programs, you can learn more about . Experienced private mortgage insurance (PMI). This is a special insurance policy that allows you to make a smaller down payment. It increases their monthly housing bill, but it could make getting into their new home much easier. Basically, the money you don't put down in a down payment is broken up into a monthly payment that is added to your mortgage until you catch up on the down payment.
Set your budget
At that point, you know where your money is, and you know how much you need to save for your down payment. It's time to decide how to acquire this money. It starts with saving. Even if you only save $10 a week for something, it adds up quickly over the course of a year. If they can skim their phone bill, their utilities and maybe their insurance, they're well on their way, and that doesn't include the cuts they can make in their discretionary spending.
You can also search for additional income. Everyone is talking about the part-time job, and it is a legitimate way to secure your down payment. Even if you channel your inner teenager and mow the lawn or babysit for some extra cash, you'll still get that down payment as long as you put it away. An extra $50 a week won't take much time, but it will add up to $2,500 a year. Every cent counts.
Saving for a house seems daunting until you break it into smaller pieces. It is not about acquiring thousands of dollars. It's about making small decisions over time that set you up for success. Stick to it and you will succeed.