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Owning your own house may seem off in the distance, something unreachable. And so you are content to rent.
But don’t be! Owning your own house is one of the best investments you can make in your life. Each month that you pay rent, you are literally purchasing a home FOR someone else.
You are paying their mortgage off, or better yet if they have no mortgage now, you are just making them rich!
So, it’s time to stop doing that!
Why not put the same amount of money each month into your own house, so that someday if you want to sell it you get it all back, plus some. Saving money for a downpayment may be the only thing holding you back.
It is not nearly as hard as you think. You can actually purchase a house for as little as 3.5% down if you are. a first-time home buyer! That means if you find a cute little house for $150,000, all you need is $5,250 saved for a downpayment.
If you haven’t started saving for your own home yet, start today!
Why should you buy a house instead of renting?
Well as I mentioned, renting just means you are buying a house for someone else! In most cases, a mortgage may cost the same or even less than what you pay in rent.
So renting truly is a waste of money. Putting that money towards a mortgage each month means it will come back to you someday should you choose to sell.
Plus, as you build equity you are increasing your financial health. You could potentially take a cash loan on the equity of your house and use it to start a business.
Here are 5 easy ways to save money for a house
Saving up enough money for a house is easier than you think! Stick to these 5 easy tactics and you will be well on your way to skipping rent.
1. Create a budget and stick to it
Its hard to save when you aren’t keeping track of where you are spending. If there’s nothing to hold you accountable, the spending comes too easily!
Create an actual budget today. Write down all your expenses, bills, rent, insurance etc. Subtract everything you have to pay, from what you make.
And, then you can know exactly how much extra there is each month that you can put into savings to buy a house. Make a line item for entertainment, but don’t overspend that!
Write down the amount you can and should be saving each month, and hold yourself to stick to that goal.
2. Drop UNNECESSARY expenses
When you write down all your expenses to create your budget, carefully review each item for things to cut.
If you are paying $160 a month for cable, but could drop to a cheaper program that is $120 do it. And then put that money into a savings account for a downpayment on a house instead.
Trust me, you will enjoy that cable much more when you are watching it in your own home!
Look for bills that can be reduced or cut altogether. Paying someone to mow your lawn? Do it yourself for a few months! If you find several bills to reduce, and a couple to remove you could end up with a couple hundred extra for savings each month.
If you just save an extra $200 a month, you’ll have that $5,000 downpayment for a home in two years just from that!
Try these tips for living below your means to help drop even more expenses.
3. downsize your lifestyle so you can buy your own home
One of the most effective ways to save money for to buy your own home is to downsize. For instance if you have a super new car with a super hefty monthly payment, consider ditching it. Turn it in for an older, less expensive car so you can save.
The good news is, once you’ve save enough money for a downpayment, you can always upgrade your car again.
The short term sacrifice of a cheaper car is worth it in the long run. Some other ways to downsize might be to get a roommate if you have an extra room to rent. Or to stop spending on clothes or eating out for a few months.
There are many frugal living tips you can adopt to help you downsize your lifestyle and save more money for a downpayment on a home.
4. set up automatic withdrawals for savings
If you find it hard to trust yourself to have enough extra to save at the end of the month then set it up automatically.
Create an automatic direct deposit or withdrawal from your paycheck straight into a savings account for the day you get paid. That way the money is already gone and you can’t use it that month!
There are a lot of automatic savings apps out there that will help you. My favorite is Acorns, which rounds up your spare change every time you make a purchase and places into savings. But the best part is it uses that change to purchase stocks so you are making even more than you saved!
5. make extra income to save money to buy a house
If you want to know how to quickly save for a house, the answer is to make more money!
My favorite way to quickly save money for a downpayment on a house, or any purpose really, is to make more money.
The fastest way to save is to increase your income. You can take a part-time job, or start your own side hustle to kick up your savings.
Let’s say you take an extra job on weekends waiting tables at a restaurant, or babysitting for the neighbors. It could add up to $1,000 or more a month.
Getting back to that $5,000 downpayment, that means you could save up enough to buy a house in just 5 short months!
Plus, as an added bonus, you might have fun and meet new people.
If you want more flexibility than a part-time job may offer, then start your own side hustle.
There are tons of tips and tricks out there to help you save money for a home downpayment quickly. You can save as much as $5,000 in 6 months!
The point is, it is a lot easier than you think, you just have to start! Today!
How Much Money should you save before buying a house?
Well, that depends. If you want your monthly mortgage payment to be less, putting more money down on the house up-front will help with that.
The least amount you have to save to buy a house is 3.5% of the purchase price if you are a first-time home buyer.
Most conventional loans require at least 5% down if it isn’t your first home purchase. So on a house that is $300,000, you would need $15,000 for the downpayment.
You will also need closing costs, which can be as high as 3%. But, there are ways around that. You can ask the seller to close all or part of the closing costs so you don’t have to have as much cash to close on your house.
The more you put down, the lower your monthly mortgage will be and the lower your interest rate which saves a lot of money over time!
If you decide you want to buy a rental property instead of a primary residence, you will need 20% down. I did this for my first home purchase and made enough money to buy my own home a year later! I highly recommend this route.
In any case, there are options on how much you need to save up to buy a house. Set a goal and stick to it!
Where should you save your money for a house?
I’ve really only got one suggestion on where you should keep your money while saving for a house. A high-yield savings account will give you interest on your money, so over time you are making a little bit of money. I like Discover’s online savings account.
Once you have enough money saved for a downpayment, what should you do?
The next step you should take is to talk to a mortgage specialist. You need to get approved for a loan in order to buy a house.
Getting a pre-approval to purchase a home is a relatively simple process. You just need to find a bank that gives mortgage loans and provide some key financial information to them.
They will tell you how much money you can spend on a house (with your saved downpayment of course!) Then, you need a real estate agent and you can start looking for your dream home.
And, make sure you know the all the steps to buying a home so you are prepared.
Start saving for a house today
If you start today, before you know it you can have enough money saved up to make a downpayment on your own house. There’s no better investment choice you can make!
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Here are my favorite budgeting and saving apps:
iBotta for special offers and cash back on groceries.
Acorns which takes your spare change from purchases and invests it for you to help you make even more money.
Personal Capital for money management. Get a money dashboard, free analysis and personalized wealth advice.