The prospect of buying a new house is exciting, but can also be somewhat daunting. You may look forward to owning a property that's all your own, but wonder if you can save enough to successfully meet your goal. In addition, you may have several other questions, such as: "What should my budget look like? Where should I reduce spend? When should I start saving, and how?"
The following information will discuss 4 practical ways to begin saving for a new house, and eventually make your dream a reality.
Determine Your Budget
One of the first things you should do is determine how much you can afford in your search for a new house. You'll need to take into account both initial costs and ongoing costs. For instance, many money experts recommend that new homeowners only spend between 25-30% of their income on monthly mortgage payments; many lenders will flatly refuse to approve a mortgage loan that costs more than 35% of an applicant's income.
Determining a reasonable budget at the outset of your house-hunting project will help make the rest of the process much smoother, with less unproductive (and potentially costly) detours along the way.
Set Savings Goals
Once your budget is set, it's time to start laying down some guidelines for yourself. What amount of money do you need to have stored up to cover the down payment and other upfront costs? Remember, besides the down payment for a new house, which could cost anywhere from 7% to 20% of your total house budget, you'll likely have to pay for other initial expenses such as:
- Home inspection
- Home appraisal
- Closing costs
Be sure to factor these expenses into your savings plan, and act accordingly.
Cut Back on Luxury Spending
We all enjoy spending pocket money on the occasional luxury item or experience. The problem is, those small luxuries can add up to a big amount of spending. For example, let's imagine that you pay for the following products/services in one month:
- Eating out: $100
- A premium haircut: $25
- A gym membership: $15
- Brand clothing purchases: $125
- Cable TV: $25
Just these 5 items alone would total $290 - half of a mortgage payment for some smaller houses!
Granted, it requires discipline to temporarily put your enjoyment of the finer things in life on hold. However, in the end your self-control can help you to buy a new house sooner, and with less financial stress.
Open an Online Savings Account
When you open a savings account with a reputable financial institution, you make it that much easier to allocate your resources in an efficient way, and cut down on unnecessary spending. As an added bonus, many savings accounts offer highly competitive interest rates for bank customers.
If you implement the 4 suggestions discussed above, then you will likely find that the saving and house-hunting process will be faster, smoother, and ultimately more successful. At Third Coast Bank, our team of friendly financial experts is standing by to answer any questions you may have, and help you meet your goals. Reach out to us today to open a savings account, or to explore our wide array of financial services