How to start

Saving for a home

Saving for your first home can be overwhelming. Every day you hear reports of home prices skyrocketing, and you’re probably wondering, how could I ever save enough for my own? Don’t worry, we’re here to help. We can help you figure out what changes you need to make (small or large) to get closer to your dream home.

Step 1: Set a House Budget 

When you’re first looking at available homes, it can be hard to narrow down exactly what you need, especially when you’re presented with so many options. It’s important to keep a few guidelines in mind as you’re picking your first home, like:

  • How much space you need for your family
  • Where the home is located (what kind/size neighborhood is it, how close is it to school, grocery store, work, gas station)
  • What extras are important to you – bigger garage, large backyard, landscaping, etc.
  • Whether it’s a fixer-upper or move-in ready
  • What kind of monthly payment do you feel you can afford? Try our mortgage calculator to determine the best fit for you.

All of these items will help you do your research so that you can get a better idea of what you would need to save.

Step 2: Set a Savings Goal 

After you’ve done a little research on housing in the area and defined your must-haves, it’s time to set your savings goal. You must consider the upfront costs and the ongoing costs when you do this. Upfront costs include:

  • Down payment – This can be up to 20% of your purchase price, but most first-time homebuyers end up putting down less than 10%.
  • Basic home inspection - $300-$500 depending on location
  • Home appraisal - $400-500 average
  • Closing costs –The average total closing costs for most buyers is 2% to 5% of the loan amount

Ongoing costs include:

  • Utilities
  • Taxes and property insurance
  • Maintenance costs

If the home you’ve got your eye on is a fixer-upper, you’ll have to make sure you budget enough for this too. You can never put aside too much money for your first home. You may find you run into unexpected expenses before you’re even fully moved in, like making sure you have enough to pay utility deposits on your new home and final utility bills from your previous residence as you transition into your new home. Or if the moving bill was bigger than you expected, you’ll want money for that too.

Step 3: Set a Timeline 

With all the excitement that comes with buying a new home, it can be easy to forget that saving for a home can take years. Don’t be discouraged, homeownership is a big step and you can reach it by sticking to your carefully planned budget. However, it’s important to remain realistic. If you need to dial back your savings some months, that’s okay. Try to get back on track as soon as you can and tell others about your progress to keep yourself accountable. Once you determine the amount you can save each month, divide that amount by your savings goal for upfront housing costs and you’ll know how many months you have to go before you walk through the front door of your new home.

Step 4: “Play House”

Before you purchase your first home, practice what it would be like once you have one.

For six months, do the following:

  • Pay your rent on time every month to practice making your mortgage payment
  • Put a set amount of money into a savings account the same day you pay rent, just like you would for insurance property taxes, maintenance costs, etc.

After six months, check in with yourself. Was it easy to deposit that money into savings? Or did you struggle every month and end up skipping a few? Once it feels easy to allocate those funds into savings, you can afford your house. You’ll also have a good chunk of money already saved from your months of “playing house”.

Step 5: Review Your Credit Score 

Keep your interest rates low by keeping your credit score as strong as possible. You want to try to stay in the 700s or higher. If you’re not there yet, follow some of these helpful tips to get you started.

Step 6: Start Downsizing 

If you’re planning to buy a house, you’ve probably already started the budgeting process to make sure all your finances are in order, but if you haven’t, now is a great time to cut back on any money-wasting expenses.

Take a good hard look at where your money is going each month to see if anything is costing you more than you expected. You can try to save some cash by getting a smaller, more fuel-efficient car or selling any large items taking up space in your current home that you don’t need. If you get rid of enough things and find you don’t need as much space as you thought, try looking into a smaller, cheaper apartment or get some roommates at your current place to cut down on living expenses.

Step 7: Get Rid of Bad, Expensive Habits 

Everybody has a habit that costs them money. That’s not a bad thing. But certain habits can be worse for your health and budget than others. For example, if you’re a heavy smoker, the expenses from purchasing cigarettes and going to the doctor more often could be preventing you from making headway on your home savings. Maybe you have a habit of buying tons of lottery tickets after each paycheck. Each time you don’t win big, you’re losing money. Maybe you just can’t stop yourself from finding those “good” online deals and impulsively shop when you don’t need to. With some discipline, all these bad habits can be reduced so you get more money into your savings account.

Now, if you occasionally get yourself a fancy coffee from a coffee shop or like to go out to lunch with friends once a month, these are not considered bad habits. You don’t have to cut out all the fun just to save some money for a home.

Step 8: Ask for a raise or look for a higher-paying job

Depending on the industry you’re in and where you live, this may be easier said than done. It can be intimidating to ask for a raise or even consider looking for a higher-paying job, but it can really pay off when you’re trying to reach your savings goals. There are a few things to keep in mind when you do ask for a raise:

  • Make sure to ask about a raise after an extremely successful project or “win” for your company. Don’t try to bring it up during any stressful deadlines.
  • Be prepared to show upper management proof of why you deserve this raise. Have data on your work, results, and any other performance data you can find, including personal recommendations from other coworkers.
  • Show confidence. One of the most important things you can do when asking for a raise is show how invested you are in the company and how you are willing to take on new challenges.

If you don’t like your current job or asking for a raise didn’t pan out like you thought it would, it may be time to look for a new job. In today’s job market, there are opportunities in just about every industry, so don’t be afraid to look. Do some research on the best companies to work for and compare any salary information you can find. It doesn’t hurt to ask around and build more professional connections to get the job you need to reach your savings goals.

Step 9: Get a part-time job

If you’ve already looked into getting a raise and failed or are looking for a new job but not finding the salary range you want, it might be time to look for a part-time job. You could even look into freelancing so you can work from home and save money on transportation. Working some nights and weekends will start to add up, especially when you funnel it all into a savings account.

Our Best Advice? Stay Focused 

Life is full of twists and turns, no matter what your plans are. You never know when you might need some extra cash. The road to homeownership can feel endless but know that if you stay focused on your goals and don’t let small setbacks take you off your savings goals, you will be well on your way to owning your own home before you know it. If you’re ready to start planning for your future dream home, talk to a mortgage lender in your area today!