Buying a home is an exciting and complicated yet a fulfilling streamlined process. One can’t cross the sea merely by standing and staring at the water; to buy a home saving is part of the process. Resist an impulsive purchase; to save. This step will bring you closer to buying your dream home. However, do not buy a home until you are ready for an investment, rent till you can afford to buy one.
Currently, the median home price is $187,000, 5.4 percent higher over the past year. Expect the prices to rise 2.9 percent within the next year. If you are ready to buy a home now, here are the 7 steps to take to save to buy a home. Banks and financial institutions lend money; however, the interest rates are high and savings help pay large sums as down payment.
Step#1 Create a monthly budget with goals in mind
Be realistic about your spending habit and try to make limited expenses; stick to the monthly budget. Print the list of monthly expenses, verify and settle them; moreover, it helps keep every payment on track. Isolate the savings to minimize expenses by creating a dedicated bank account for housing fund. Make use of the checking account to pay the monthly expenses like gasoline, utilities, restaurants, entertainment, parking etc.
Step#2 Start attacking your debt
Use the traditional snowball method to take care of any debts; start with the smallest amount and work towards the largest. Getting out of debt is difficult, not impossible, curb all expenses. Make all payments timely, this will ensure improved credit scores and more freely available income.
Step#3 Create Emergency fund
It is critical to storing up an emergency fund worth six months of expenses. Avoid dipping into the new housing fund to care for the housing fund. Set up an automated savings plan to forcibly save and accommodate unforeseen expenses. Save raises and bonuses, invest in creating funds like money making accounts, and well-timed certificates of deposits (CD).
Step#4 Determine the goal
Prepare a list of features in the new home, preferred neighborhoods, and set a realistic budget and timeframe with the help of a real estate agent. Save at least 10 – 20 percent of the down payment. If you plan on getting a mortgage, get pre-qualified; calculate 25 percent of your monthly take-home pay on a fixed rate mortgage of 15 years.
You must start saving before you purchase, however, decide on the saving schedule, two or three years, is a short duration for accumulating the funds required towards the down payment.
Step#5 Keep expenses down and earn more
Once the debts are paid off, you are living a life without payments. Use discount coupons, clip coupons, carpool to keep expenses down as every penny counts. Save the amount in the housing fund account. Look for opportunities to earn more money – a second job, freelance, and a garage sale to add the additional earnings to the house fund. Everything you do will take you closer to the path to home ownership.
Step# 6 Pause retirement savings
While saving for your home stop investing to stack-up cash for retirement, as it will bring you closer to the goal faster. However, it is not wise to put off retirement savings for longer than a few years while saving for a home. You will be able to pause when you started to save early.
If you like to work longer, after the retirement age, you will be able to continue to save later as well.
Step#7 Earn more from a strong support system
If you have family and friends to support, it will keep you motivated. Your partner can pitch in to add their earnings and savings. The finish line will never seem unreachable. Review all the steps time and again as well as the amount saved to ensure you are on track. If your goal seems unreachable, asking for support from family members is the best way to build up more funds.
Several factors contribute to the entire buying process of a home; money is the biggest one of them all. All the steps may seem to have skinny returns in the beginning; however, keeping cash for down payment is more like ‘out-of-sight and out-of-mind’. These are the 7 steps to take to save to buy a home according to one of Central Florida top real estate agents Fred Franks of Local Realty Service and Katrina Barone of Houses for Sale in Ocala FL.
