Tips for Saving for a New Home on a Budget
By: Kristen Herhold
Owning a home is one of the best long-term investments you can make for yourself and your family. Saving to buy a new home for your family isn’t easy. But with some savvy budgeting and realistic goal-setting, it is a milestone you can achieve that will pay off in the long run.
Whether you are looking to buy your first home or sell the one you have for an upgrade, here are five tips for saving money for a new home while keeping your family on a budget.
Set your budget
Moms are no strangers to setting a monthly budget. Just like choosing daycares and buying groceries, it’s important to know how much you can afford to spend when it comes to buying a new home.
To set your budget, think about what you most want from a home, including the number of bedrooms, proximity to schools, and so on. Research how much local homes are selling for and the amount homeowners are paying every month on a 30-year mortgage. Even if you aren’t ready to buy, a local real estate agent can help you find a home that meets your goals and your budget. Find a top-rated expert in your area to start planning today.
Before placing a bid on any property, you need to save money for a down payment on your future home. While the amount you pay can vary depending on your mortgage lender, plan on saving for a 20% down payment. This will help you secure a low-interest mortgage from a reliable lender, which will save you money in the long run.
Automate your savings
When you are living on a fixed budget, it’s tempting to wait until the end of the month to put money into savings. But if you are serious about saving for a new home, set your monthly savings goal aside at the same time you pay your other bills.
To make saving even easier, arrange to have money deposited in a savings account every month the day after your paycheck hits. Consider putting that money in a high-yield savings account so you can earn additional income from the interest. Having your money in a separate account will also reduce the temptation to dip into your savings for impulse purchases.
Build an emergency fund
Owning a home is a big responsibility and investment. Sometimes that investment comes with unexpected expenses, such as when the air conditioner goes out on the first day of summer. By building a home emergency fund, you can prevent these inconveniences from becoming full-out disasters.
Save enough money to cover the cost of emergency home maintenance, including your HVAC system. It’s also helpful to have three to six months of mortgage payments saved in case your income suddenly changes. Consult a local real estate agent or broker to find out how much you should set aside for emergencies.
Save your windfalls
We all look forward to getting our tax refunds or company-issued bonuses. Instead of putting that money toward a family vacation or buying a new sofa, put that money into your new home savings account.
You probably don’t include windfalls in your family’s daily budget. By depositing this money in your new home fund, you can reach your savings goal even faster without having to pinch as many pennies.
Pay off your other debt
Having a down payment for your home is only part of the equation. When it comes time to buy a house, you will also need a mortgage from a reliable broker. Your chances of getting a mortgage for the full amount you need and securing a good rate can be significantly improved by reducing your other debt.
Although you may not be able to pay off the full balance of your credit card or auto loan right now, take steps to reduce your balance. Start by paying off more than the minimum amount due each month. Not only will this help your credit score, it will also show lenders that you are a great candidate for a loan.
As an added bonus, the sooner you pay off those other debts, the faster you will free up more money to make your future mortgage payments.