{"id":29486,"date":"2022-02-14T11:13:19","date_gmt":"2022-02-14T19:13:19","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=29486"},"modified":"2022-02-14T11:13:19","modified_gmt":"2022-02-14T19:13:19","slug":"buyer-how-to-save-for-a-house-faster","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-how-to-save-for-a-house-faster\/","title":{"rendered":"How To Save for a House Faster and Make Your Homeownership Dreams Come True Sooner"},"content":{"rendered":"

Homeownership is one of the great American dreams. Unfortunately, it\u2019s one that can feel entirely out of reach for many people who see saving up for a down payment<\/a> as a great, insurmountable hurdle. Figuring out how to save for a house faster can feel like a full-time job!<\/p>\n

But it doesn\u2019t have to take years and years to save up for your dream home<\/a> if you do it in a smart, strategic way. In fact, the closing date on your first house could be just a year or two away if you go into the savings process with a clear plan to follow.<\/p>\n

We\u2019ll map out how you can create a savings plan that both works to get you into your dream home ASAP and<\/i> works for you on a day-to-day basis in the meantime.<\/p>\n

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1. Know how much you need to save!<\/h3>\n

How much you need to save for a down payment<\/a> and associated expenses will depend on what type of loan you\u2019re expecting to get.<\/p>\n

FHA loans<\/a> often require just 3.5% as a down payment, although some buyers with lower credit scores may require 10% as a down payment.<\/p>\n

Fannie Mae\u2019s HomeReady<\/a> loan program and some other conventional loans can be approved with as little as 3% as a down payment, although 20% is required to avoid paying private mortgage insurance (PMI).<\/p>\n

USDA loans<\/a> and VA loans<\/a> are popular because they offer zero percent down for eligible buyers.<\/p>\n

According to the Federal Reserve\u2019s Economic Data<\/a>, the national median home price in Q3 2021 was $404,700.<\/p>\n

FHA down payments for the national median home in Q3 2021 would be ($404,700 x .035 =) $14,164.50 for a 3% down payment and ($404,700 x\u00a0 .10 =) $40,470 for a 10% down payment.<\/p>\n

For a conventional home loan that requires a 3% down payment, the national median home would require ($400,700 x .03 =) $12,141, and with a 20% down payment, you\u2019ll need to save up ($400,700 x .20 =) $80,140 for the same median national home.<\/p>\n

Loans with a 0% down payment would obviously require no down payment, but a larger loan balance could mean higher monthly payments.<\/p>\n

Of course, the median home price across the United States can be very different from what a house will cost in your city or state. According to World Population Review<\/a>, median house prices in Hawaii and California are two of the highest, at $615,300 and $505,000 respectively, while West Virginia and Mississippi are two of the lowest, at $107,927 and $127,206 respectively.<\/p>\n

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2. Research down payment assistance<\/h3>\n

If you\u2019re short on cash, a down payment assistance program<\/a> may be your saving grace. They are designed specifically to help first-time homebuyers leverage loans and grants to cover their down payment savings shortfalls<\/p>\n

There are thousands of these programs across the United States, although most are local, and each one has its own set of criteria you\u2019ll need to meet.<\/p>\n

Some of the most popular down payment assistance programs are grants that match your down payment, so if you are trying to save up a 3% down payment, you may only need to save up 1.5% yourself, and the grant will match the other 1.5%.<\/p>\n

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Source: (Sincerely Media \/ Unsplash)<\/figcaption><\/figure>\n
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3. Set a budget<\/h3>\n

Now that you have a sense of what you need to save, you can make your budget to ensure you get there. Saving $12,000 for a down payment is very different from saving $80,000 \u2014 and the amount of time you expect to give yourself to save matters, too. Trying to save $12,000 in six months will look different than saving the same amount over a year.<\/p>\n

Take the amount you want to save and divide it by the number of months, or even weeks, that you have to accrue those savings. This amount tells you how much you need to save every month or week.<\/p>\n

Cut expenses<\/h2>\n

One of the fastest ways to save money is to look at your recurring expenses and see what you can trim down or eliminate completely.<\/p>\n

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4. Groceries<\/h3>\n

You don\u2019t have to give up your treats in order to save money on your groceries. Sometimes, the easiest and most effective way to save money on groceries is to swap out brand name items for the store brand version.<\/p>\n

This extends to where<\/i> you do your grocery shopping, too. Swap out Whole Foods and Wegmans for ShopRite, Aldi\u2019s, and Trader Joe\u2019s, and you could see your grocery bill drop dramatically without a noticeable change in how your meals look and taste.<\/p>\n

If there is something you eat a lot of, consider buying it in bulk, as bulk items generally have cheaper per-unit prices, even at regular grocery stores \u2014 Costco membership not required.<\/p>\n

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5. Rent and utilities<\/h3>\n

Do you really need such a big place, or would it be worth moving somewhere smaller (temporarily) to help you save up for a house? If you can\u2019t move right now, perhaps you could find a roommate.<\/p>\n

Moving to a smaller place or finding a roommate won\u2019t just save you money on rent<\/a>; it\u2019ll also save you money on utilities. The cost of water, gas, and electricity will be lower when you have less space to heat and cool, or if you\u2019re splitting those bills with someone else.<\/p>\n

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6. Car payments if you can<\/h3>\n

If you\u2019re a two-car household, look into whether you can get by with one car for 6 or 12 months while you save up.<\/p>\n

If you\u2019ve been working toward paying off your car early, stop and put that money into your house fund instead.<\/p>\n

If you\u2019re already paying the minimum, look into whether refinancing your car is possible. Refinancing can lead to lower monthly payments either by extending your loan term (same money owed, but spread across more months) or by lowering your interest rate (you\u2019re paying less money to have the loan).<\/p>\n

You could also look into lowering your car payment by trading down to a car with more affordable payments.<\/p>\n

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7. Car insurance<\/h3>\n

Car insurance can be expensive, so see if you can reduce your rate. You can do this by checking what you\u2019re paying for already and eliminating any coverage you don\u2019t really need. Choosing a plan with a higher deductible and lower monthly costs could be smart if you rarely have issues.<\/p>\n

You could also opt to bundle multiple policies under the same insurance company, such as your renter\u2019s insurance and your car insurance. Look into low-mileage discounts if you don\u2019t drive much, or take a safe driving course if your insurance offers discounts for doing so (many do!).<\/p>\n

Most importantly, shop around and see which company will give you the best deal for your situation. You\u2019ll often find it isn\u2019t whoever you\u2019re already paying for car insurance.<\/p>\n

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8. Eliminate any subscriptions<\/h3>\n

It\u2019s easy to get sucked into paying for Netflix and <\/i>Hulu Plus and<\/i> HBO Max and <\/i>\u00a0Disney+ and <\/i>Spotify and <\/i>Amazon Prime when each one is only a few dollars a month, but they can quickly add up.<\/p>\n

Sit down and take a long, hard look at which subscriptions you actively use and which you use only occasionally. Cancel anything you aren\u2019t actively using on a regular (every few days at most) basis. Pick between streaming services and cable television, if you haven\u2019t already.<\/p>\n

If you\u2019re paying for Audible or Kindle Unlimited, cancel them both, and borrow audio and digital books from your local library instead.<\/p>\n

If you have grand plans to learn a language or skill and are paying for a subscription to that platform but aren\u2019t using it, cancel it.<\/p>\n

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9. Stay home instead of taking a vacation<\/h3>\n

Vacations are fun, but they\u2019re also a great way to spend a lot of money in a short period of time. Instead of taking a vacation while you\u2019re saving up for your down payment, book a staycation in your current home. You can still take the time off and do some sightseeing and adventures in your city \u2014 but you\u2019ll save hundreds, if not thousands, of dollars on flights and hotel rooms.<\/p>\n

If you really need a change of scenery, consider a weekend trip to somewhere you can easily drive or take public transportation to reach. Book in advance or catch last-minute deals to keep the trip from blowing your budget.<\/p>\n

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10. Pause your gym membership<\/h3>\n

Instead of paying for a gym membership, go for runs outdoors with friends or your favorite playlist.<\/p>\n

If you prefer guided classes, check YouTube for some great yoga, aerobic, and even strength training sessions.<\/p>\n

If you need the accountability of a trainer, ask a friend to be your workout buddy. You\u2019ll scratch the social itch as well if you decide to work out together.<\/p>\n

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11. Refinance your student loans<\/h3>\n

Many want-to-be homeowners feel they can\u2019t manage both their student loans and a mortgage, but the truth is you likely can do it. You may just need to refinance or consolidate your student loans first to make those payments more manageable.<\/p>\n

You may be eligible for a better interest rate due to the market, or better credit now thanks to a longer credit history. And you may decide that extending your loan term or switching your lender will have the desired effect of lowering your monthly student loan payments, so you can put more aside for that house.<\/p>\n

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12. Stop any expensive habits (or at least press pause)<\/h3>\n

People always tell you to stop your morning (and afternoon?) coffee shop habit and put that money aside for a down payment, but indulgences like cigarettes and alcohol will put just as much of a dent in your budget, if not more. Drinking out is extra expensive, but even the bottles of beer, wine, and spirits at home will still add up quickly.<\/p>\n

If you\u2019re in a state where cannabis is legal, and you use it recreationally, now would be a good time to cut back or eliminate that indulgence while you\u2019re saving up.<\/p>\n

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13. Redirect your 401(k) contributions<\/h3>\n

Another thing you can do is redirect your 401(k) contributions temporarily<\/a> to help grow your down payment savings account.<\/p>\n

Of course, if your company matches a minimum percentage, you may not want to move all your 401(k) contribution dollars over to your down payment savings account. In that case, you\u2019re likely better off continuing to contribute whatever your employer will match and moving only what you\u2019re currently contributing over that amount.<\/p>\n

If you\u2019re not contributing anything beyond what your employer matches, it may not make sense for you to redirect your 401(k) contributions at all. This is the kind of decision financial advisors are wonderful at helping you make.<\/p>\n

\n Before you buy anything \u2014 that cup of coffee from Starbucks, those jeans from Amazon or that burger from your local sports bar \u2014 ask yourself, \u2018Do I really need this right now?\u2019 In one day, you can spend $7 on a coffee, $90 on a pair of jeans, and $15 on a burger and a soda with tip. That is $102 you didn’t need to spend that you could have put in the cookie jar to get those down payment savings going.<\/q>\n
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