If you are planning to purchase a house of your own saving for a down payment should be on the top of your list. It may seem like a daunting task to save a large amount of money but by following some simple steps, you can quickly reach your down payment goals.
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How Much Should You Save?
When you plan to save for a house the first question that you should be asking is how much should you save. Your savings amount depends on the cost of the house you are looking to buy and the home loan that you would qualify for depending on your annual income. Banks and financial institutions have an online calculator that can assist you in determining the home mortgage that you may qualify for once you plug in your monthly income, home loan terms, and monthly expenses into it. In some cases, lenders also allow borrowers to pay lower than 20% in down payment if they fulfill the criteria for a low deposit income home.
Commit to Regular Savings Model and Bank Any Windfalls
The key to successfully reaching your down payment goals is by making savings a regular habit. Understand your down payment amount and set realistic goals for saving after taking out your monthly bills and expense amount. It is recommended to create separate savings account to bank your down payment savings and set up automatic payments to eliminate any temptations and ensure that you do not miss on regular savings. While you are saving for your down payment, bank any windfalls such as income tax refunds, pay raise, bonus, or money generated after selling any personal assets.
Create A Separate Emergency Fund
Unforeseen circumstances such as health issues, personal matters, accidents, car repairs can arise and quickly deplete your savings. Hence, it is a good idea to create a separate emergency fund that can come in handy during any emergencies so that you do not have to use your down payment savings account to stay afloat.
Review Your Budget
Once you have made savings your regular habit and are comfortable contributing to your savings account, review your budget to check if there are any areas that can help increase your savings. Some ways you can increase your savings is by reducing your budget for clothing and entertainment, saving money on rent, canceling your gym membership, and riding a bike instead.
Additional Ways to Save
Some additional ideas and alternatives that you can adopt to reach your savings goal sooner include:
- Avoiding leisure travel for a year
- Adjusting your insurance premium
- Spend-free weekends every month
- Paying with cash in place of credit
- Taking a second job
How Can A Mortgage Professional Help You?
Down payment is only a part of the money you require when purchasing a house. You will also need money to pay for closing costs such as insurance, utilities, and real estate taxes. Hence, when buying a new house, it is recommended to contact a mortgage professional who can help you understand the costs associated with a house purchase, help you get low rates, and ensure that your dream to buy a new home is fulfilled.
The experts at Rex Homes have some additional information on best ways for you to save for a down payment on their blog here: https://blog.rexhomes.com/down-payment-savings-guide/