Is one of your goals for the New Year to purchase a home? Buying a home is an expensive investment, and requires early planning to save what you need. Here are some of the expenses associated with purchasing a home, and tips to start saving now.
Down Payment
The down payment is the initial payment you put towards a home to decrease the total you will have to borrow for a mortgage. Typically, putting down at least 20% of the purchase price up front will decrease interest rates and allow you to avoid buying private mortgage insurance.
Mortgage
Your mortgage is the loan that you borrow from a lending institution in order to pay for the house. You can use our mortgage calculator to estimate the monthly payments you might expect from that home you have your eye on.
Private Mortgage Insurance
Depending on your loan provider, if you put down less than 20% of the home’s price as a down payment, you may be required to purchase private mortgage insurance which protects the lender in the event you are unable to make your mortgage payments.
Closing Cost
The closing cost covers any expenses involved in getting the house ready to transfer to new ownership and typically is about 3-6% of the purchase price.
Tips to Save
Start saving as soon as you can by putting aside money from every paycheck into a savings account specifically for your home. If your bank allows you to automatically move money into a savings account, set this up so you don’t even have to think about it.
Cut spending where you can. Sit down and really examine your monthly expenses and determine what is essential and what you can do without. It’s likely you have several subscriptions that you don’t even use, and those small amounts can add up. Cut back on things like eating out or going on pricey vacations.
In addition to cutting costs, you can find ways to increase your income by learning new skills, asking for a raise or promotion, or earning extra money through a side gig.
Don’t forget about other sources of funding such as mutual funds, stocks and bonds, the cash value of your life insurance policy, and gifts from parents or other relatives.
Conclusion
The most important thing to remember when buying a home is to start saving early. Educate yourself on all the costs associated with home buying and start preparing as soon as you can. Working with an experienced realtor can help you navigate everything that goes into purchasing a home. Please contact us with any questions.
