Buying a house is a big decision but the process with regards to planning and execution is probably just as important. The prep work involved in buying a home doesn’t start when you sign the dotted line on some bank-drafted documents, it begins with a vision and an idea of where you (and your family) want to be in the future. The financial preparation, and saving for a down payment on a home is the best place to start your homeownership journey. Here are some great ways to save for a down payment.
Set Goals and Get Prequalified
Rule #1 of home buying is setting a realistic goal for what price level you want to reach for in your home. You can do some quick internet searches to determine home values in your area and easily compute the price per square foot of a home in your desired neighborhood or city. Be sure to take into account your existing rent or lease when deciding on what you can afford.
Typically, your housing expenses shouldn’t be anywhere north of 25% of your stable income. Use this as a baseline to figure out what kind of mortgage you can afford, and speak with a mortgage lender to begin the prequalification process. By starting with a lender and getting an idea of what you’re qualified for, you’ll have a leg up on the homebuying process.
From there, you can decide how much of a down payment you should make on the mortgage in order to reach your monthly goals for payments. At that point, you’ve got a number in your head and a direction to start your down payment savings.
Be Time Focused
Once you’ve established how much you are looking to spend on your home/down payment, it’s time to set a timeframe for your big purchase. Deciding when to buy is just as important as the decision to buy itself. Many homeowners will set aside a year to begin saving for a home while some will save for even longer before deciding to pull the trigger.
Whatever timeframe you decide on, make sure you can make contributions to a dedicated home down payment account. This account should be treated like an IRA or other “untouchable” financial instrument in that you contribute but never remove funds but can be as safe and simple as a savings account. Decide how much per month you can contribute to a specific account for your down payment, and make sure you can safely attain that goal. Keep in mind that extra expenses such as fees associated with the sale of a home, closing costs, and moving expenses are all part of the deal upfront. Save a little extra if possible to cover some of those superfluous costs.
Be Budget Conscious and Don’t Get Discouraged
Some potential homeowners will shell away every nickel and dime for their dream home only to end up with a substantial nest egg savings at the expense of their enjoyment of life. Don’t be one of those folks! Instead, keep your monthly budget in mind and be conscious of its subtle changes. Everyone has a budget, and each one has a mind of its own. Don’t let the odd expense or unfortunate medical bill be a deterrent to your dream of homeownership. Instead, go with the flow and let life happen naturally.
If you can’t make one of your savings deposits, don’t worry. It’s not the end of the world. Don’t try to make up ground if you don’t have to. After all, a month of missed savings in the big scheme of a year or two probably won’t be the difference between you buying your new home or not. While we all experience pitfalls that detract from our financial goals from time to time, there will always be a house for you somewhere regardless of when you’re ready to buy.
The best start to owning a home is to get in touch with a mortgage lending specialist. Give Tidewater Mortgage Services a call today to talk about your financial and homeownership goals, and let the pros at Tidewater get you moving in the right direction for the home of your dreams. Don’t delay, though. Once you’ve decided to make a move, it’s time to get your plan in order and start saving today.