You might not plan on buying a house for a couple of years, but that doesn’t mean you shouldn’t start saving for a down payment if you want to take the leap in the near future. You will need to save a relatively large sum of money that you will need to access sooner than later.
The more money you can offer as a down payment can end up saving you money in the long run. Here are some steps to buy a house that can help you get closer to your dream home.
You should first determine how much money you need to save. You want to sit down with or get a mortgage lender on the phone who can help you know how much of a mortgage you can qualify for since your housing expense shouldn’t exceed 28 percent of your stable monthly income. This means you take your monthly income and multiply it by .28 to allocate your future house payment.
That money will include your mortgage interest, real estate taxes, mortgage insurance, homeowners insurances and possible homeowners association dues. However, don’t get scared off by calculations and numbers because a mortgage lender can do all these for you based on your financial information.
After you have determined how much you need to save, you should then determine your timeframe of when you want to buy a house. Set a timeframe for yourself so you know how much to save per month or year. The shorter your timeframe, the higher your savings goal should be.
If you are looking for ways to save for that down payment, you should not invest in risky investments such as stocks for example. Instead, do it the old-fashion and boring way by putting your money in a savings account or a certificate of deposit. You may be swayed to invest in high risk opportunities because of the idea of being to earn a lot of money quickly, but you can also lose a lot of money quickly as well during that process. You don’t want to lose any money you need to buy that dream home.
Also, since you are starting to save more than usual, you will have to make some room in your budget for your savings goal. This may mean taking another job for additional income or cutting back on frivolous expenses such as shopping and coffee trips. This type of budgeting will help you save the money and you need and prepare you for having a tighter budget that homeownership requires.
You may want to set up an automated savings plan to help you get into the savings spirit. You can allocate a dollar amount or a certain percentage of your pay directly into a savings account to accumulate funds.
These are just some steps to take that will help you get closer to owning your own home. It is a long process that requires a lot of savings and preparation. However, the steps you take for buying your house will help you realize the work and expenses that go into homeownership and will get you ready for the next part of your future.