Part of getting ready to purchase a home is making sure you have the financial assets available. To help get you one step closer to buying that home you have your eye on, here are 5 tips to help you save for your new house.
Set a Goal & Budget
The first thing to get done is to know your target by setting a goal.
Looking at home listings will give you an idea of what to expect to pay for a down payment in your desired market.
Keep in mind that you will want to try contributing a down payment of 20% of the total cost of the chosen property to avoid paying Private Mortgage Insurance, or PMI. If you’re unable to put down 20%, your mortgage lender will add any PMI charges onto your monthly mortgage payment.
Another important point to remember is to include a bit of padding in your savings target to account for monthly expenses and the possibility of unforeseen costs. Once you know your savings goal, put together a detailed, realistic budget. Include every bit of income and expenses you can think of so you have a clear picture of what you can feasibly save every month. Once your budget is complete, you may find little extra bits you could be saving by cutting your expenses.
Control Your Debt
With your savings goal and budget put together, you need to make sure your debt is as under control as possible or eliminated entirely.
When applying with a mortgage broker, they will want to see you can float a reasonable amount of debt responsibly over time. If you’re able, take some time before putting in any offers to reduce any debts you owe and allow yourself to continue to save bits of income away for that big down payment.
By managing your debts you are much more likely to secure a good interest rate through your mortgage lender, and this could save you a substantial amount of money in the long run.
Delay Retirement Savings
One tip that seems to go against every bit of advice you hear up to this point is to temporarily put your retirement savings on hold. If you free up that bit of your income for a while it gives you more to put in your account to help you save for your new house.
There’s nothing stopping you from restarting your retirement savings once you meet or exceed your down payment goal. Adjusting your retirement savings plan for the short-term to allow you to have a home you love in the long-run is a worthwhile change.
These days there are quite a few different apps that help you budget and find ways to help you save for a new house.
Doing a quick online search will reveal a bunch of options, including some that are free or that offer free trials. Also, each app may provide slightly different tools and have their own feel. It might be a good idea to try a few out to get a good idea of which one is right for you.
Save Your Windfalls
Finally, while attempting to meet a savings goal, you want to keep that savings goal in mind whenever additional income might come your way.
Maybe you receive a tax refund or a bonus from your job – these are perfect moments to boost those accounts to help you save for your house. In the event that you have an incredibly tight budget, you could rework your budget and see how much additional money you have available every month. It’s up to you to determine the best approach.