Buying a house is never cheap. This is the first thing you learn once you start investing in real-estate. An average house in the US costs $188,900. And, when you factor in all the paperwork, and additional payments, it will round up to about $200,000. Not to mention the fact that you will have to make a down payment in order to buy a home. Now, everyone knows that buying a home is costly. But, what everyone doesn’t know is how to save money for one. Especially when it comes to down payments. So, let us look at ways to save money for a down payment on a home.
How much will you need to save
Your down payment is always calculated by the amount you are going to spend on your home. By conventional mortgage standards, you will have to pay 5% of your total home price. But, this kind of down payment will require you to buy mortgage insurance which can add between 0.5% and 1% annually to your loan amount. This is called a PMI. And, seeing as it can take a while to come up with the necessary 80% of the loan in order for this additional payment, you are better off avoiding it. And the way you do it is by making a down payment of %20. This is considerably higher than 5%. But, it will save you quite a bit of money in the long run. So, let us see how you can save up that 20%.
Everyday ways to save money for a down payment
The best way to save money for a down payment on a home is by changing your spending habits for a while. Unless you plan on depriving yourself of quite a lot, saving money for a down payment is going to take a while. Furthermore, you will need to maintain a good credit score, if you plan on getting a loan. So, let us see how you to organize so that you do not suffer, and save enough money in a year or two.
Make a saving plan
Start by making a savings plan. For instance, if you are going to spend $200,000 on your home you will need to pay $40,000. And let us say that you plan on having that amount in two years. This means that you will have to save around $1,667 every month. Whether this is a lot or a little depends on your current financial situation. So, in order to make a savings plan, you need to carefully consider your spendings and earnings. Only then can you figure out if the amount and the timeframe for the down payment are viable.
Pay close attention to your spending
One of the biggest reasons why people don’t manage to save money for a down payment on a home is due to mindless spending. Once you start meticulously keeping track of your spending habits you will soon see how much money you spend without even noticing. We wouldn’t be surprised that you can save as much as $200 monthly by simply paying attention to what you spend your money on. So, if you want to make sure that you save enough money for your down payment as soon as possible, pay close attention to your spendings.
Sometimes, even with best efforts and planning, you will need to postpone making your down payment. If this happens you need to be aware of it as soon as possible. Changing the time when you will make your payment can have repercussions on your entire purchase. So, the sooner you realize that you are going to have a problem with making your down payment, the better. If you realize this in time you can still find a way to deal with it. But, if you choose to ignore it and come to terms with it when it’s too late, you might lose your entire purchase.
Making a savings plan and practicing financial discipline in order to see it through is the best way to save money for a down payment on a home. But, considering how the USA housing market will be in 2020, this may not be enough. So, let us see some additional ways in which you can save up money for your down payment.
Another expense you will have to consider is relocation. Planning your relocation carefully can save you a lot of money which can then be funneled into your down payment. You can visits sites like movingbuddiesaz.com and learn clever ways to save money on your relocation. Smart strategies like these can be quite helpful when trying to save money for a down payment. So, be sure to study up on them carefully.
Working with the right movers
Another important thing to mention is the movers. The biggest expense regarding your relocation will be the movers. Therefore, it is no surprise that you should spend as much time as possible finding the right ones. Now, it may seem like a good idea to look for the cheapest ones possible. But, this can be quite risky. Your best bet is to find reliable, local, cost-effective movers. So, for instance, if you need some to help you move to Ohio from Arizona in no time, look for experienced movers. With their help, you will move efficiently and you will save some money for your down payment.
One of the ways you can get more money for your down payment is by borrowing from your retirement fund. Now, the way in which you can do this depends heavily on the type of retirement fun you have. You need to talk with your bank and carefully consider this option before you opt for it. Furthermore, you need to have a steady job before borrowing money from retirement. So, make sure that you are financially steady and secure before you chose to speed up paying your down payment.