In order to purchase the home of your dreams, it is essential that you take control of your finances. Without the right savings plan in place, it can feel like a daunting – and nearly impossible – task to save up money for a house.
Luckily, your experienced McAllen realtors at Equity Assets Realty know a number of fantastic strategies and tips to help you buckle down and save enough for that down payment. If you’re ready to take the first step to becoming a homeowner, take the following money-saving strategies to heart.
9 Tips You Need to Know to Save Money for a House
1. Consider Your Timeframe
This is essential to determining how much you will need to save within a given amount of time. If you plan on purchasing a home within a 3 to 5 years, then you can calculate accordingly.
2. Track Your Money
Before you thought about buying a home, you might have been a little lenient about your spending. Going out with friends? No problem. Treating yourself to a nice meal? Why not.
But now that you’re saving up to buy a home, you need to become somewhat of a penny pincher. This means you’ll need to track your spending and expenses. You might be shocked to find out you’re spending a hefty amount on luxury items that you can definitely live without.
There are plenty of apps and online tools that can help you figure out how much is leaving your bank account and where you can save.
3. Budget, Budget, Budget
This tip goes hand in hand with tracking your money. Once you have an understanding of where your money is going, it’s time to set some limits. While this may not be the most exciting step, it is a necessary one, nonetheless, and will help you to get the keys to your dream home that much faster. Areas to keep an eye on include:
- Groceries – Be a smart consumer and see what types of items can be cut and consider buying off-brand.
- Monthly Expenses – What services are you paying for that you don’t actually need? Are you paying extra for unlimited data on your cell phone? Unless it’s essential, cut it. Look into your internet service, any memberships that you really don’t take advantage of, and the likes.
- Luxury Expenses – Do you enjoy spending the weekends taking in all the local sights, attending concerts, going to the movies, and just generally being social? Awesome. Except these expenses tend to take a lot out of your bank account. While it’s ok to splurge every once in a while, it shouldn’t be happening every week.
- Housing Expenses – If you think saving up might take you some time, it could be in your best interest to move into a cheaper place or rent out any extra rooms you may have.
4. Boost Your Income
If you are really invested in purchasing a home ASAP, one of the best steps you can take is to increase your income by working extra hours at work, picking up some part-time work, or using any talents or skills you may have to get some freelance work.
5. Pay Off Debt
High-interest debt can do a number on your paycheck. Having to pay off numerous credit cards and other high-interest loans can limit your ability to save.
If you budgeted correctly and cut back on unnecessary expenses, you can use some of this money to attack your debt and bring it down. Another benefit of this tip is that you’ll be improving your credit rating at the same time.
6. Save Any Extra Money You Get
Perhaps you’ve received a bonus from work or are expecting a sizable tax refund. Any sort of financial windfall should be put into a savings account that is going towards purchasing a home.
7. Set up an Automated Savings Plan
It can be a challenge to save money when you are receiving all of your paycheck in your regular bank account. You’ll see the money and be much more tempted to spend it.
By automating the savings process, you essentially avoid this. You don’t ever see money – so to speak – making it harder for you to spend it.
8. Open Up a Certificate Deposit (CD) Account
A CD account is a savings account with a fixed interest rate and a set date of withdrawal. There’s a penalty for withdrawing your money early, so there’s enough of an incentive to not touch your money.
You’ll add a couple of extra dollars to your savings with this type of account and also limit the possibility of dipping into it.
9. Keep In Mind Other Costs Associated with Buying a Home
Saving up for a house isn’t just about the downpayment, there are a number of other fees and costs that you’ll need to keep in mind. These additional costs include:
- Appraisal and Inspection Fees – You’ll need to have your home inspected and appraised before your mortgage is approved.
- Closing Costs – These fees must be paid before “closing” on a mortgage contract and can reach between 2 to 5 percent of your total mortgage.
- Private Mortgage Insurance (PMI) – This fee is placed on your monthly mortgage payment if you put down less than 20% for the home.
While this is by no means an exhaustive list of tips to saving money for buying a home, it should provide you with a great head start.
When you are ready to make that big purchase, make sure to reach out to the McAllen realtors at Equity Assets Realty.