Congratulations! You have decided to start saving for a new home. That means you’re well on your way to investing in a place that you can truly call all your own and a place that, over time, will give back to you the hard work and value that you have placed into it.
However, despite its long-term benefits, buying a house is a big goal that comes with a lot of tall financial orders. If you’ve done any research at all, then it’s no secret to you that saving for a new home is an intimidating process.
But at Peoples Bank Home Loan Center, we are determined to help you wade through the weeds, sift through the fog, and do whatever else we can to help you achieve this milestone.
Here are some things to consider when saving for a new home!
When should I start saving for a new home?
The sooner, the better! If you’re thinking about saving up to buy a new home, then what better time to start than now? “How?” you might ask.
First, determine your range.
Do some math to determine what you can afford to spend on a home month-by-month. What do you currently spend on rent or a mortgage? How does that stack up against what you’re trying to spend on a new mortgage? As a rule of thumb, it’s typically recommended to spend no more than 25% of your monthly take-home income on your mortgage payments.
Once you’ve determined this figure, you can use that to gauge a number of things, including prices within your budget and the necessary down payments. While down payments usually range between 10% and 20%, some homebuyers can qualify for a Federal Housing Administration (FHA) loan or VA loan, which require less down payment.
Then, get your debt under control.
Saving your hard-earned dollars is challenging when a majority of them are allocated toward existing debts. Not only that, but a heavy debt burden with high interest rates can also make it difficult to qualify for a favorable mortgage rate. Spending to save may sound confusing, but tackling your debt head-on will save you hundreds, if not thousands, of dollars that will make saving for (and buying) a new home a whole lot less of a headache.
Capitalize on cash windfalls.
In the event of a large cash windfall (whether it be a tax refund or lottery winnings), avoid the temptation to spend — your home savings fund will thank you!
Make cuts wherever possible.
This is an easy way to save that proves tough for some people. Take some time to reflect on your current spending habits to find things that could be cut or minimized. Are there any unnecessary luxuries that you are paying for every month, such as entertainment or unused subscription services? Do you eat out more often than your savings budget might allow? Cutting back is tough, but it’s one sure-fire way to maximize your saving potential.
Financial literacy is especially critical when it comes to saving for a new home. If it’s your first time, then it can seem even more tedious and uncertain. It’s no simple undertaking, and every dollar and decision counts!
Peoples Bank Home Loan Center wants to help you make all the right ones and answer all of the questions that you might have along the way. Ready for more personal attention when saving for and buying a new home? Let’s talk.