You’ve likely done a substantial amount of research into the home-buying process. Now, you’re ready to take the first, most significant step to get this process going: saving for the down payment. This can be a profoundly overwhelming process at first glance, but don’t fret. With proper planning, appropriate budgeting, and professional guidance, you will be able to save up for a brand-new home much faster than you ever expected! Here are some tips on how to get started as provided by Rex Homes.
1. Determine Your Savings Goal
You will have to do a bit of preliminary research on this first step. Ask yourself, “What kinds of homes have caught your eye? Do they lie in the mid-$200,000s or high $400,000s?” Perhaps there is a neighborhood that you prefer to live in. Review the pricing of the housing in that area, and narrow down your budget from there.
Once you have an idea of the price range you’re looking at, use an affordability calculator (these can be found on realty websites such as Zillow). Enter your gross monthly income, your current expenses, and your ideal term for a home loan. The calculator will then show you the expected down payment (typically 20% of the asking price), and you can get to saving from there!
2. Start Saving Regularly
Now that you have a clear goal set in place, it’s time to begin your regular contributions. The key to a successful savings routine is consistency. Decide on a monthly budget and set up an automatically recurring payment. This way, you will not allow yourself the room to second-guess your finances, since you won’t be manually paying each month.
(Remember to go easy on yourself – it’s better to save a small amount of money at a time, rather than trying to put away too much at once. Figure out a payment amount that is productive, but also doesn’t break the bank!)
3. Put Any Surprise Funds in the Bank
It may be tempting to spend that tax refund, extra money from your pay raise, or a bonus from work, but don’t be so quick to get rid of that money. Instead of spending these surprise funds on food, vacation, or anything else, put it in the bank. These are great for giving your home savings the boost it needs to reach your ultimate goal much sooner. (Such bonuses are also great in case you need to pause your contributions in financially challenging circumstances.)
If you do not use these funds to contribute to the savings for a down payment, apply them instead to an emergency fund. It’s best to have a cash cushion to fall back on in times of need, even if you do happen to be saving for a home at the same time.
4. Look Over Your Budget
All aspects are now in place! As you make contributions to your future down payment, you must review your budget regularly. Identify areas that need improvement and make adjustments according to your financial circumstances over time. It would benefit you to go over your budget with a mortgage professional as well. They will be able to clue you in to what lenders are looking for and provide you with the best advice for preparing yourself for a brand-new home.