Buying a new house is one of the biggest milestones for many people, and the largest purchase one may ever make. You will have to put some money down for most of the mortgage, and that is not the only thing you should save for. You will also have to save to pay for closing costs, maintenance, property taxes, and the ongoing repairs after you buy the. This may be a lot to take on, but you should save for a few years before you can buy a new house.
This may seem like a long time, but here are a few steps to speed it up. While it is tricky to gather a thousand dollars for the down payment when you have already stretched to the maximum with expenses such as rent, utilities, student and auto loans, transportation, and possible childcare, it is still possible to save.
In case, you are hoping to own a new house in the future, here are some of the best tips to save for a new home:
1. DetermineHow Much You Need
It is not necessary to save 20% down payment to buy a new house. Many banks now offer conventional mortgage loans with 3% down payments. There are many government-backed mortgages like FHA loans which allow 3.5% down payments, VA loans and USDA loans which would enable no down payment. The cost of the mortgage insurance depends on your loans, and you may find that this is a worthwhile trade-off if it gets you into your new house sooner. It is advisable to meet with a mortgage loan officer to see what kind of loans you qualify for, how much of a home you can afford, and how much of a down payment you would need. By doing this, you can determine how much you have to save, and it may be a lot less than you think.
2. Get Your Debt Under Control
Carrying a lot of debt makes it difficult for you to save for a new house since more than half of your income goes toward repayments. That debt loan can make it difficult for you to qualify for a mortgage. If you have debts, do whatever you can to reduce it. In case, you have student loans with high- interest rates, refinance them to lower your payments. If you have a high- interest credit card debt, pay it as much as you can and transfer your balance to a low- interest credit card.
3. PutYour Retirement Savings on Temporary Hold
Putting your retirement savings on a temporary hold may not be the right advice if you are close to retirement. But if you are young and are contributing a percentage of your income to a retirement plan like 401(k), consider diverting that money to down payment savings temporarily. This should be short term, but it can make a huge difference in how quickly you can save for a house, especially if you put a huge amount of every paycheck into a retirement account.
4. Askfor Gift Money
When your family asks you what you want for your birthday, Christmas or Hanukkah, anniversary or any other occasion, tell them you do not need tangible items, and you need gift money that you can put in a house down payment. While everyone may not accept, some of your relatives would love to help you attain your dream of homeownership.
5. Geta Side Hustle
With the gig economy expanding, there are many ways to earn a buck to help boost your down payment savings. Consider spending a few hours a week driving for a rideshare service, shopping, or delivering meals for an online delivery service, walking dogs, pet sitting, and charging self -service scooters. Due to technology, there is an ever- increasing number of freelance opportunities like these, which require a few qualifications and make it easier to earn extra cash which you can save for your new house.
6. UseTechnology to Make Savings Less Painful
Cutting back and setting aside money is essential if you want to save up for a home, but taking a portion out of your every paycheck can feel like it is cramping your lifestyle. If that is the case, try an app like Digit, which uses technology to save a small amount daily automatically, which would not hurt your budget. There are also Acorns which rounds up your purchases to the nearest dollar and puts the difference in your investment account. Your spare change can add up quickly over time, and you can make one off-deposit whenever you want to.
There will be a time, halfway to buying a home, that you will be tempted to take a spontaneous trip to London with your savings. To protect yourself from this, do not store your down payment savings in your local bank account. Try a separate savings account or a money market account to save your down payment savings. Saving money to buy a house may take a lot of work and discipline, but if that is something you want, you can do it.
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