8 Smart Saving Tips – How to Buy Your Next Home?
Walking down the street
Seeing the beauty of city lights
I stopped for a moment
And dreamed of having a beautiful house…
Years ago, I was going through the rough patch of life. But the power to dream more kept me going. When the finances stopped working in my favor, I chose a new way. From there my journey started and I took the word “savings” seriously.
I tried some smart saving tips that helped me along the way. You too can take help of these tips if you wish to buy your beautiful sanctuary.
Buying a house should be an exciting moment in your life. But because it’s a huge investment, it can also be stressful. And it may well be one of the biggest purchases you will make in your lifetime. So putting a roof over your head requires a great deal of planning.
I hate to break it to you, but you’re going to have to seriously think about saving money consistently over a long period of time. And with CNBC reports stating a rise in U.S. house prices by 4.3% in 2019 and a forecasted increase by 3.6% this year, you’ll need a healthy stash of cash to cover the down payment, the cost of closing, and property taxes. For some, unfortunately, there’s also the hidden cost of repairs and maintenance that must be done before moving in.
So yes, your budget can get stretched thin. But this does not mean that you can't dream about owning your own house.
Want Some Ideas on How to Buy Your Next Home?
Well, you’ve come to the right place. We’ve got a selection of some of the easiest savings tips that you can follow.
Simply keep on reading.
1. Determine How Much the Property Costs
You need to begin your endeavor by having a general idea of how much money you need to save up.
The first step is to search the real estate market in your area and get a realistic estimate of current prices.Costs of home ownership vary depending upon the size of the house, the location, and its condition. For example, properties in Chicago suburbs are a bit pricier than those in Atlanta.
2. Take Into Account Additional Costs
The most significant chunk of payment you’ll need to make is the down payment. Aim at paying 20% down payment to get the best-priced deals. It’s the ideal way to save money in the long-run.
This amount is not mandatory, though. Some banks now offer conventional mortgage loans with down payments as low as 3%.
Next is the closing costs.
They are typically about 2-5% of the purchase price. But don’t buy a house if you plan to move soon.
That’s because you will have to pay the closing costs on both the purchase and sale of a property. And moving furniture doesn’t come cheap either.
But ongoing repairs in your house can put a dent in your wallet too. So before you set out to sign the papers, make sure you have at least a couple thousand dollars left over in savings.
But for those individuals interested in buying a property for the sole purpose of renting it out, there’s another factor to think about.
You will need to consider hiring a real estate management company, especially if the property is out of state.
But costs will vary, even within the same city.
For example, real estate management in upstate New York will be higher than in other areas within New York.
3. Get Your Expenses Under Control
When you’re trying to save money for a house, every penny counts.
There are a few effective ways to get your expenses under control.
This includes little aspects such as turning off the lights to cut down on the electric bill to maintaining your car in order to keep it petrol efficient.
But the most crucial way to manage a budget is to buy with cash only.
This can significantly put the brakes on your spending habits because you’ll think twice about your purchases instead of letting it add to your credit card bill.
For more suggestions on how to cut your costs, read How To Save Money Tips – 7 Fundamental Habits.
4. Set up a House Savings Fund
Dedicate a portion of your paycheck solely for the home fund. According to moneyunder30.com, aim at allocating 28% of your stable monthly income for future house payments. More importantly, think long term.
So set up a timeline as to how many years you will need to add to your savings fund consistently.
5. Work as a Team
Every person in the household needs to understand the importance of buying a home.
They will definitely need to compromises along the way.
It could be as harsh as cutting back on out-of-state holidays for a period of years to downsizing extravagant parties.
In fact, some couples plan to dedicate the earnings of one member, however small, directly into the house buying fund.
On the other hand, others opt to place their retirement savings on hold temporarily and divert these payments for the down payment.
6. Get Another Job
It may sound extreme, but for those of you who are young, healthy, and have a few extra hours to spare, think about taking on another job.
It's an easy way to increase your income, and it can give your savings a much-needed boost. And with the booming economy, options are plentiful.
Opportunities include ridesharing services, online delivery service, babysitting, walking dogs, freelance writing, etc.
Most require limited qualifications, so anyone can easily earn a bit of extra cash.
7. Automate the Savings Process
There are ways where technology can really help you save money.
Fix a percentage of your regular pay to go directly into a dedicated savings account. And because the process is entirely automated, you won’t see it happening.
So now you won’t be tempted to spend the money on other things.
And to make saving money more fun and easy, there are numerous apps that promote the concept of saving without it feeling like it’s cramping your lifestyle.
Two that you should look into are Digit and Acorns.
But if you are really fortunate, you can shorten the time frame to buy your next home by depositing income-tax refunds, cash gifts, bonuses, money from the sale of other personal assets, or any other source of unexpected cash into this account.
8. Get Your Previous Debts Under Control
If you are dealing with debts or loan repayments, it makes it harder to save money for a home at the same time.
Instead of trying to juggle everything, aim to pay off your debts before starting to save money.
And loans with higher interest rates such as credit card debt or student loans, you are losing a considerable amount of money by merely delaying paying them off.
So ideally, you should focus on paying off as much as you can initially.
Then transfer or refinance the balance to a loan that offers a lower interest rate.
The money you are saving has a definite purpose. So keep your savings safe by placing them in a savings account or a certificate of deposit.
Avoid using them for investments where there is a degree of risk involved, such as stocks.
Moreover, be prepared for unexpected road bumps such as auto repairs, medical expenses, or temporary loss in employment.
Keeping your plans flexible allows you to adapt to changes. But no matter what happens, you should not lose sight of your ultimate goal- the house around the corner.
Evie Harrison is a blogger by choice. She loves to discover the world around her. She likes to share her discoveries, experiences and express herself through her blogs. Find her on Twitter:@iamevieharrison
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