Homeownership is a goal that many Americans aspire to achieve but, unfortunately, isn’t guaranteed for everyone. It takes a lot of money to buy a home, especially in today’s market.
But don’t let current prices stop you from having your own place and never paying another dollar for rent again. Having your own home is just a matter of knowing how to start saving money for a house. Here’s what you can do:
Before you learn how to start saving money for a house, answer these questions:
Before you learn how to start saving money to buy a house, you have to know why you’re doing it. How you answer these questions will define your journey to homeownership. Let’s begin:
Is it worth it for you to buy a house?
Homeownership comes with hidden costs – maintenance fees, real estate taxes, and even more bills. Many first-time homebuyers get caught off-guard by these. You need to be able and willing to pay for these expenses if you want to be a homeowner.
You also have to determine if buying a house is better than buying a cheaper apartment. Apartment life comes with its own problems and hidden fees, but it’s not usually as expensive as a house.
Decide if you want a pre-built home or to build one yourself.
If you want a home, decide whether to buy a prebuilt home or build one yourself. The former is much cheaper, but you don’t get to customize it. The latter can be more expensive, but you get to design it based on what you want.
By when do you want to buy a house?
You have to set a target year for homeownership. This goal will help you decide how much you have to work towards owning a house.
Where do you want to live?
Housing markets are different across America. How much money you need to buy a home will depend on where you want to live. Houses in hot real estate markets, like Seattle, will be more expensive than those in the rest of the country.
If you want to know how to start saving money for a house, here’s what you should be doing:
As an aspiring homeowner, doing these will make your path to homeownership much easier. These are the first things to do when you’re trying to learn how to start saving money for a house:
Eliminate Debt
If you’re in debt, you may not be in the position to buy a house in the near future. Some banks may not approve your loan application. If you want to start saving money for a home, eliminating debt is the first step.
Save an emergency fund
It’s essential to have an emergency fund. This is a fund dedicated to paying for emergencies. Having one will guarantee you’ll be able to pay for all your necessities in the event of a tragedy. It should be at least six months’ worth of expenses.
Once you have an emergency fund built, you can contribute more money towards your housing goals. Speaking of…
Set up a budget and financial plan
A financial plan is a plan that will help you reach long-term financial goals, such as homeownership and retirement. When making one, you set a goal and create conditions that you need to hit to achieve it. For example, to buy a home in California in 20 years, you would have to save $50,000 a year. A financial plan will make it easier to track your progress towards your goal of homeownership.
Having a budget will ensure you’re allocating enough money for your necessities in the meantime. Don’t ignore your short-term well-being for your long-term goals, sis!
Don’t know how to make your financial plan? Check out my article for helpful tips.
Invest
Investing your money in assets such as stocks and funds can give you more income. These can help you pay for your dream home, especially if homeownership is a long-term goal.
Want to invest but don’t know how to start? Check out my list of books for investing beginners.
Build credit score
You may need to take out a loan from your bank to own a home. Having a good credit score will make the loan approval process much easier.
To build credit, you have to prove to the bank that you can pay back loans. A simple way is to purchase things with your credit card and then pay the bank immediately. Doing this consistently will ensure a good credit score over time. You should never buy what you can’t pay for with cash on hand with your credit card.
Make sure that your credit score is accurate.
Make some sacrifices
If you want to own a home, you have to be prepared to make a few sacrifices. You can limit your purchases for yourself to increase the amount of money allocated towards buying a house. It’ll be a challenge at first, but you will get used to it.
Want to know a handy way of limiting your spending? Check out my article on the cash envelopes system.
Pay your taxes
It’s essential to pay your taxes and is especially so if you want to become a homeowner. Your tax returns can be used as proof of income for loan approval. Paying taxes ensures that the IRS won’t seize your home once you eventually buy it.
Start some sidehustles
A little extra money never hurts. If you want to make more progress towards owning a home, consider starting a side-hustle to generate more income.
Many different hobbies can be turned into side-hustles. Check out my article on the topic if you want to know more!
Once you know how to start saving money for a house, here are the next steps:
After all of the previous steps, you’ll be much closer to owning a home. But this guide to learning how to start saving money for a house doesn’t stop there. Here are the next steps:
Familiarize yourself with the process
Buying a home involves a lot of paperwork. Find out what exactly you need before you proceed with the home-buying process.
Meet with big bankers
If you want to buy a home through bank financing, talk to your bank about what you need for a mortgage. A mortgage is a bank buying the property and allowing you to live in it. In turn, you pay them back for the house plus interest. Banks may have different requirements for mortgage applications, but you will have to…
Prepare your proof of income
There are quite a few papers you can provide as proof of income. A certificate of employment from your employer and your tax returns are just some examples.
Keep an eye on the market
It helps to keep an eye on the housing market, even if you don’t have enough money to buy one outright. There may come an opportunity that’s too good to pass up.
For example: in 2021, mortgage rates were at a record low. Many homebuyers saw this as an opportunity to finally buy a home–and they did!
Figure out what you really want in a home
A few years into your journey to homeownership may make you realize that your dream house isn’t what you want. You may not want features like a huge backyard or four bedrooms. You have to know what you really want in a home before buying it and regret it.
How to NOT start saving money for a house:
When you’re learning how to start saving money for a house, these are the things you should avoid:
Make frequent big purchases
Big purchases are justified when necessary, like if your car breaks down or your phone is unusable. However, you shouldn’t make big purchases frequently as these will set back progress on buying a home.
Ignore investing
Ignoring investing is like leaving free money on the table. The sooner you start investing money for your future, the more money you’ll earn over time.
Dip into your emergency fund
Your emergency fund is not extra savings account for your shopping sprees or vacations. There are only two scenarios where it’s okay to touch your emergency fund. The first is when there’s an actual emergency, like if you get laid off from your job. The second is if you want to deposit more money into it.
Stop learning
The more you learn, the easier it will be to reach your financial goals. That’s why you should sign up to become a member of the financial fam today! As a member, you’ll receive personal finance tips and insider information from me. Occasionally, I’ll even send a special message to remind you that you’re doing great, sis! Signing up is quick and 100% free, so what’re you waiting for? Join today!
