It’s no easy to save money for a house if you don’t know where to start. Coming up with the money for a down payment on a house is no small effort.
A collaborative post / What is your life’s goal? Having goals – career, financial, health – for the different areas of your life can help you stay focused and keep you working hard toward something that matters to you. One common goal that we have? Buying a house.
Many people dream to be homeowners one day but not sure how to make it a reality (me too). For most first-time homebuyers, saving money to buy a house is the hardest part. There are so many factors such as your income, debt, and responsibilities that come into your mind.
I still learn to manage and save my income. Saving for a house deposit is not something that is easily achieved and does take a large amount of discipline and a well-executed strategy.
Knowing how much you need is the first step. Then accumulating money for a down payment is the second – though it can take years, it’s not an impossible task. After making a few adjustments on what you are currently spending money on, you can set aside funds from your paycheck and track your savings growth until you have as much as you need to buy a house.
In this post, I will share with you 6 tips to save money for a house. I’m not an expert but I think these tips will help you to save money to buy a house one day.
How Much Money Should I Save for a House?
Actually, there is a big difference between how much money you need and how much you should ideally have. If you are going for an FHA loan, they allow down payments as low as 3.5%. FHA loans are helpful for homebuyers with limited savings or lower credit scores.
For a traditional mortgage, you will need at least 10 percent and for the most in cost savings, you will need to have 20 percent.
This means that if I want to buy a $150,000 house, I will need to save:
- $5,250 for a down payment for an FHA loan
- $15,000 for a down payment through a traditional mortgage
- $30,000 for a down payment to realize the most in cost savings
Therefore, how much money you need to buy a house will differ according to the type of mortgage you plan to get.
How To Save Money For A House
Saving for a down payment can lead to spending and saving habits that can benefit you long after you purchase your home. Homeownership frequently comes with a lot of surprise expenses, so it can bring you peace of mind to know that you have funds saved up to handle the costs associated with making home improvements.
Be Smart With Your Money
As a 20-something blogger, I’m so bad at managing my income. I still need help from my mother to manage my money until I could do it by myself.
You probably know how much money you get every month, but do you know where it is all going? I spend my money mostly on food, books, clothes, and the wifi bill. With the help of my mom, I try not to be silly with my spending.
It’s not a difficult thing to do to pay very close attention to how much you spend for a couple of months. You can find out where you’re spending the most money and then try to think of ways to reduce those amounts.
Try to cut down on the things you don’t need to buy and when you don’t care about brands, buy the cheaper version.
Once you see which area you can save money, allow yourself a budget that is lower than what you have been spending, and then put the extra money you save into your savings account.
Take It Straight Out Of Your Paycheck
Save your money as soon as you get paid and then live off the rest of the month – stretching it as far as you can. I used to save what is left and live for the entire month. That’s really bad!
If you try to live first and save second you will find you run out of money before you get a chance to save, but if you save first then you will find that you can stretch to live off the remainder.
People have a tendency to spend more freely when they have more income available to them. Therefore, you can create an auto-deduction into an account separate from your savings. You can save 50% of your income, or a set amount, such as $100 then deposit to a savings account on each payday.
If you see the house you want to buy, calculate the minimum income required to afford it. Consider the money in your savings account already spent and avoid the temptation to dip into it. Once you have adjusted to this decrease in spendable income, try to deposit more to the savings account each payday. The more you set aside, the faster you will reach your savings goal!
Limit dining out
If you work outside, it may be tempting to eat lunch in your company’s cafeteria or out at a restaurant each day. Packing your lunch can enable you to save more in a year. Similarly, cutting down on eating out with friends can save a surprising amount of money.
I used to eat lunch outside when I work outside, I spend my income mostly on food. Now, since I work at home, I try to limit eating outside. When I meet with my friend, we tend to go to affordable places so we can save more and enjoy our day out!
If your friends know that you are saving up for a house, they will understand. You do not need to forgo dining out altogether, just cut down on it. Every time you stay in instead of going out, deposit the $25 or $50 you would have spent into your savings account.
Make a budget and stick to it
Making a budget is no good unless you actually stick to it. I make a budget for my food, car or transportation, beauty treatment, stationery, and clothes. Some people have told me that they spend less on groceries when they take cash, instead of credit cards, to the grocery store.
This makes sense since you know exactly how much you can spend and you will be forced to pay attention to exactly how much everything costs when you pick it up. This can lead to your making wiser choices.
Sell Your Stuff
Check your wardrobe. How much of your stuff do you actually need, and how much do you actually use? If you have a lot of things you are hanging on to “just in case” or because you just can’t bear to part with them, consider their value if you were to sell them in an online market.
This is not the most popular way to raise money for your down payment, and it is not likely to yield a large sum of money, but it can help you build your savings, while also helping you de-clutter before moving into your new home.
Create A Second Income For Yourself
If you want a great idea on how to get a house deposit quickly then there is almost nothing better than creating a second income for yourself.
It is likely that you could be using your current skills outside of your workplace. If you work as a mechanic, then you may be able to fix your friend’s cars on the weekend.
I’m working freelance as a translator. I also started to make few $$$ from my blog and I’m planning to get more clients for the next months so I can save more. If you work as a writer you could do freelance writing on the side. If you work as an accountant you could help people with their tax returns.
This blog started out as a side hustle, generating me passive income, and this month it earned me enough money that I could make the jump into working on it full time.
Saving money to buy a house does not have to thought of as a chore. I know it is time-consuming, stressful, and requires sacrifice. Not every one of these tips will appeal to you. But it is likely that you could use many of these tips together to speed up the time it takes you to save your deposit.
You have a goal amount in mind and a plan to get there. If you make a chart of your progress and watch your savings grow, this can be quite a motivator. Remember, you will be rewarded in the end for your frugal behavior. I’m working my way!
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