These smart savings strategies can help you hit your home-buying goals.
Saving up enough for a down payment is totally doable with a few smart strategies. With these tips in mind, you can figure out how to save for a house—and get there more quickly than you might think. Set your house budget. You have to set your down payment goals before you can start reaching them, and that means figuring out how much you can afford. Money experts suggest spending around 25-30 percent of your income on your mortgage — and most lenders won’t approve a mortgage that would cost you more than 35 percent. Do a little math to calculate how much you should spend on your mortgage payment each month. You can a mortgage calculator to get an idea of your target home price based on what you want to spend each month.
Set your savings goal. When deciding how to save for a house there are two main costs to consider: the upfront costs and the ongoing costs. Your initial savings goal should cover the upfront costs. This includes your down payment, closing costs, home appraisal and home inspection. Here’s how to estimate each:
Down Payment: Up 20 percent of your house budget, but most first-time buyers put down less than 10 percent
Basic home inspection: $300-$500
Home appraisal: $300-$400
Closing Costs: Between 2 and 5 percent of your total house budget
Set a timeline. The exciting thing about a timeline is you officially have a target date for being ready to buy a home. That’s a huge motivator for saving. Look at your current income and expenses and determine how much you could squirrel away each month. Divide that amount by your savings goal for your upfront housing costs and you’ve got the number of months between today and home ownership.