How to Save For a House
In today’s economy, if you ever wanted to save for a house, it is easier said than done. But it doesn’t need to be.
According to the National Association of Realtors, affordability and increasing house prices are keeping people away from investing in their new home. It seems difficult, but not impossible if you follow a few ground rules from today. You just need to get creative and focus on your goals.
Here are a few tips that can help you save for a house in this economic climate.
When Do You Need to Start Saving for a Down Payment
A down payment is one of the first things that you need to put your focus on. If you are looking to save for a house in a few years, let’s get started with how your down payment for a place should be saved up.
You should note that the bigger the down payment, the lower your monthly mortgage payments. In fact, you might not even need to pay private mortgage insurance fees. These are some of the things that can end up saving money for you in the long run.
Having said this, it’s a good idea to start saving up on your down payment today. And here’s how you can do it.
Contact Your Mortgage Lender
Get in touch with a mortgage lender. Make sure you apply for pre-qualification process, a process that lets the lender whet your finances and the outline of a mortgage that you can apply for. Use this time to find out where you can improve, be it your income or your credit score.
Do keep in mind that this process is different from getting pre-approved, which is when you become a qualified buyer of homes.
Once you’ve sat down with your lender, you will have a better idea about which homes you can afford, and what can be done to increase your budget. Let’s say you qualify for a property that is worth $100,000. You are looking to get this figure to $200,000. This allows you to determine and calculate how much you need to start saving for your home.
Use a Down Payment Calculator
You can make use of a down payment calculator online to know how to save for your house. You get down payment options based on how much your estimated purchase price is.
Now let’s look at another example. Your estimated budget for a home is $350,000. Going by a down payment calculator, you will need to save 3.5% of the value as down payment i.e. $12,250 in this case. Or, if you are looking to make a bigger down payment, let’s say 20% of the home value i.e. $70,000, then you can do that as well.
In both of the above examples, paying more as down payment means that your subsequent monthly payments will be lower. Another thing to note is that these monthly mortgage rates are also influenced by the type of loan you took out.
There are advantages to both the scenarios. A low down payment may help you qualify for your house much faster. But it may end up costing you in the long run as you will need to make bigger monthly payments plus the mortgage insurance fees. If you opt to go for a bigger down payment (more than 20%), you will end up waiving the insurance fees. However, you might find that your options to qualify for a house are less.
Conclusion
These general tips are enough to help you start and save for your house from today. But once you have a clear view of what can be accomplished with your budget, you’ll be better equipped to plan ahead for your dream place.