How To Save For Your Home

Dated: 03/06/2019

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Here are five ways to help you start saving for your home.  It's easier than you think.

1.DECIDE ON YOUR BUDGET

Prior to even looking at homes, decide what amount you can afford.  What the bank maysayyou can afford might be drastically different from what you canactuallyafford.  Calculate your total home costs, including mortgage, property taxes and home insurance, which can often add several hundred dollars to your total mortgage.

By figuring out how much house you can afford, you can then decide how much you need for your down payment. Ideally, a 20% down payment is best to avoid paying private mortgage insurance, which can easily add hundreds of dollars to your mortgage. However, if you live in a higher cost of living area like we are here in Simi Valley and Ventura County and have a solid credit score (700 or better), you can most likely still qualify for good mortgage loans with at least a 10% down payment.  There are many loan programs out there to help you.  Thiel Real Estate has partners in mortgage which can help you find the best loan for you and your situation. 

2. PAY DOWN YOUR DEBTS

The general rule of thumb is that your housing costs should never exceed a third of your total income.  However, if you have other debts, such as a car loan, student loans or credit cards, they could easily limit the amount of money you can put toward a mortgage. Consider paying down some of your debt first, which will not only help alleviate some of the financial pressure but also help you secure a better mortgage rate because likely your credit score will go up.   While it may sound counterintuitive to pay down debt in order to save, once those debts are paid off, you could have hundreds, if not thousands, of dollars freed up that can help you save faster.

3. PAY YOUR FUTURE MORTGAGE

For a few months to a year before you buy your house, start living as if you are already paying that new mortgage. This means that in addition to your rent, put the difference between your rent and assumed future mortgage payment into your savings account and treat it as you would any other monthly bill.  This habit will get you used to the idea of paying a bigger mortgage and the bonus side is that you’ll also be saving toward your house.  Again, we do live in a high cost of living area so it may not be feasible but, give it a try.  Anything you save can go towards your new house. 

4. PAY YOURSELF FIRST

Many people wait until the end of the month to see how much money they have left over before putting any money into a savings account.  This is the absolute worst way to go about it because most of the time, you’ll find you don’t have any money left over. If you want to get serious about saving, you need to calculate how much money you can put into savings first. It might take some getting used to, but once you start putting the money away, you start to adapt to it.

If you’re tempted to dip into your savings account, keep your savings account in a different bank fromyour checking account. Try using an online bank for your savings account – just to diffuse some of the temptation – many have better interest rates than conventional banks. 

5.REDUCE YOUR EXPENSES

If you’re trying to figure out how and where to save moneyif you already feel like you’re living paycheck to paycheck, start by reducing your expenses 10% across the board.  That means if your grocery budget is $500 a month, try reducing it $50 for a total budget of $450. That’s not a huge difference, but the money will add up when you apply this technique to all your expenses.  And soon enough you’ll have enough money saved for that down payment.  Just remember to give yourself time to save enough money —it’s a marathon, not a sprint. 

Just remember that you are saving not only for the house but for your future.  Real Estate is an excellent investment for your retirement.  Give us a call even if you don’t think you are ready--You could be closer than you think!

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Michael - Colette Thiel

Michael Thiel, CalBRE#01893556 Colette Thiel, CalBRE#01455972 ....

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