Saving for a house can be difficult. It takes a lot of dedication and some cut backs to really make it happen, but when you finally have all that money saved, there is no better feeling in the world!
I personally have always been a saver. I love always having a reserve of money so that I never have to stress if an emergency comes up. However, saving for a house is a totally different ballpark. Saving for a home requires a lot of time and patience to meet your goals. Of course, when you finally meet that financial goal, there is no better feeling in the world.
So how do you go about saving for a house?
Well, first lets talk about fees and cost of what it takes to buy a house so that you have a better idea on how much you need to save.
Aside from the actually down payment you will be putting on the house, there are a bunch of fees that need to be accounted for. So here is a breakdown of estimated fees for buying a house:
Fees for Buying a Home
Lawyer fees for closing – min $700 (can get into thousands depending on who you use)
Closing cost – depends on state and cost of house. Plan on $10,000 and you should be good.
Appraisal fee – approximately $600 (can be much higher depending on who you use)
Survey – this tells you the exact outline of your land and can be pricey at $700-$900
Mortgage Broker fee – $800 or more. Also depends on the business you use. When I compared a bunch of companies I found local mortgage brokers to be way more affordable than large banks/companies.
Misc Fees – add in gas tank to property $2000 approximately.
There can always be additional fees depending on your state and the kind of house you buy (old vs. new) so make sure you ask your realtor and mortgage broker for all fees upfront so you know how much you need to set aside.
How to Determine the Amount you Can Spend on a Home
OK, now that you have all the fees accounted for, let’s talk about size of the downpayment. This of course will be different for everyone and depends on your current savings, income, and how much you are comfortable paying monthly for the mortgage.
Also, make sure you are buying within your means. You don’t want to be house poor, so don’t blow your whole savings on buying a house and then be living paycheck to paycheck for another 30 years.
I felt most comfortable having a monthly mortgage payment that was a 1/4 of my monthly income. I know some people who feel comfortable pushing it to 1/2 of their monthly income but that doesn’t give me enough “emergency funds” if god forbid something happens. So, this number will be different for everyone.
Once I had the monthly payment I was comfortable with I worked backwards to find out what downpayment and property price I could afford.
Now downpayment is also different for everyone and depends on the type of mortgage you want. I personally wanted a conventional mortgage and not a FHA loan. A conventional loan requires a larger downpayment but has less fees over the life of the loan so you end up paying less overall. However, if you don’t want to wait to have a bigger downpayment you can use a FHA loan which is more lenient and easier to get with lower downpayment.
Once you have these number planned out, it’s time to start saving!
Tips on Saving for Your First Home
Ok, now that you know exactly how much you need to save, you need a plan on how you are going to get to that number. This can take some time depending on how big of a downpayment you are looking to get at but these are some great tips that helped my husband and I save over $60,000 in 1 year for our first house.
1. Cut out Spending on Clothes
This was a hard one for us at first but the more we started doing it the more we got excited about how much we were saving and it pushed us to keep going. My husband and I were spending so much on clothes and material things that we were shocked when we actually saw how much we saved on just not buying careless anymore.
It also helps to develop a more “sustainable style” mind frame and think of clothes as a long-term necessity and not as a “got to have trend”.
2. Eat Out Less
Notice how I did not say stop eating out. I just don’t think that is possible and can be overwhelming to try to plan every meal for every day of the week, so give yourself some leeway on this one.
We decided we were only going to have 1 date night out per week and then a coffee date on the weekends. This helped us cut out a bunch of spending because previously we were spending an obscene amount of money eating out (like seriously I’m too embarrassed to even tell you the number lol).
But any who, with sticking to our once a week night out rule we were able to save the bulk of our downpayment from just cutting back on eating out.
3. Grocery Shop Smarter
I was never a coupon clipper or planner before, but after I saw how much I can save with a little planning the week before a grocery run I do it every time now! I personally love Publix and I use their digital coupons and weekly savings articles as a guide on what is going on my grocery list.
In addition, I have a running grocery list in the notes section of my phone which I follow every week so that I’m not buying anything impulsively when I’m at the grocery store.
4. Sell Clothes/shoes You Do Not Want
My husband is probably the best at this because he sells all his golf shoes he does not want anymore and they hold their value really well.
This is not going to be a huge saving tip but it does add up over time and helps keep more money in your savings and more room in your closet.
5. Pick up More Work
Now not everyone will be able to do this because some of us salary folk are locked into how much we earn every month, but there is always side hustles. If you are one who has some added time you can always look into starting a side hustle (company, blog, tutoring, etc) to help you earn more money. Luckily my husband is in sales and he’s is great at it, so his income is more flexible on how much he can earn a month.
6. Cut Back on Current Rent
Now if you have the option to downsize now and get a smaller apartment to help you save more money for the downpayment, then do it!
It’s hard knowing you are paying a bunch of rent when you are trying to save for a house, so downsizing can save you more money and is a great option to get you closer to your goal.
7. Cut Out Vacations
This was a hard one for my husband and I to do because we both work so hard but it was necessary for 1 year to help us meet our dream home goal. We still took time off from work so that we could recharge but we did “stay-cations” instead of big trips which helped us save thousands of dollars.
And there you have it!
These tips on saving for a home were the exact things my husband and I did to add more to our savings than ever before.
We were able to hit our downpayment goal and then some by waiting a little longer to buy a house and from cutting out unnecessary spending.
It’s amazing the amount of money you can spend when you are not thinking about it.
By being more aware of our spending habits and truly asking ourselves if we really needed an item before we bought it was a game changer in our saving journey.
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