The bigger the down payment you make for a new house, the bigger your savings. It will also be easier to pay for the house because your monthly amortization goes down with a big down payment.
Saving for a house is not the same as putting away money for retirement. You’ll need some money to make an offer on any house for sale in St. Louis, MO, for example, and you need it quite soon. Here’s some advice to help you save for that dream home:
Get an Estimate on how Much you Need
This is the time to get prequalified, so get in touch with a mortgage lender who will tell you how much you can afford based on your total income per month. If you want to get a good deal on the house you’re looking at, think about setting aside at least 20% of the total price for your down payment. With a 20% down payment, you can find better houses and better deals.
Have a Timeframe
The ideal time to save for a house is when you start working or making money. That’s quite early, but if you want to afford a house before coming too close to retirement, it’s a good option. Would you rather party in your twenties or save for a more comfortable life in the future? Most young people would choose the former, but then regret it when they’re almost 35 with nothing to show for it. Be the one who breaks the mold.
To afford a house in five years, for example, you need to earn more money and save $9000 to $10000 per year. That should be enough to cover the down payment on a decent house.
Automate Your Savings
It’s easy to be tempted by the excitement of an extravagant vacation, or a new pair of shoes every month or two. You’ll justify this by saying you’ll save double the amount next time, but that would be a difficult rule to stick to. Instead of doing it on your own, talk to your payroll office regarding an automated savings account. They can take out the amount you specified from your paycheck and deposit it in your savings. This way, you won’t be carrying around the amount and opening the door to the temptation of breaking your budget.
These are only a few things to help you save for the down payment on your new home. Stick to your savings plan and you’ll be able to afford that house just as you planned.