How to Start Saving for Your First Home
Buying your first home doesn’t happen instantly. If you’ve never purchased real estate before, there are steps to take to make your dream happen, starting with saving for this major expense. Here’s some helpful advice from the top real estate brokers Bellevue, WA has to offer.
Decide What Kind of Home You Want
The price of your first home, and therefore how much you have to save, is determined by what type of home you want as well as where you would prefer to live. When it comes to the size and style of home you desire, think about these considerations:
• How many bedrooms do you need?
• Do you have kids or other family members who will need play or living space?
• What other home features might you need, like a home office or garage?
• Will you need a yard for pets?
• Would you prefer or need to have everything on one level?
• What are your “must haves,” such as an en suite master bath, a fireplace, or a chef’s kitchen?
• What’s your personal design style?
• Are you looking for a single-family home or a condominium with amenities and outside maintenance?
Location is, of course, also important. As well as the proximity to things like work, schools, shopping, recreation, and public transportation, think about resale value. While you may think you’re going to stay in the home for a long time, sometimes work changes or a growing family make it necessary to move. You want to get back at least what you put into the cost of the house and ideally much more.
Check Market Prices
Before you can save for anything, you need to know how much your purchase costs. Buying a home is no different. Real estate listings are available in local newspapers, online, and via real estate agents. You’ll find a range of prices for what you’re looking for, based on location, condition, and features.
For example, when perusing homes for sale in Bellevue WA, you may discover that for the same price you can purchase an enormous house in the suburbs, a small turnkey apartment in a trendy urban area, or fixer-upper in a developing neighborhood. Each brings its own advantages and challenges.
Learn About Down Payment Options
Most home purchases require a down payment, with 20 percent being the optimal minimum amount, but there are programs that let you get around that:
• Federal Housing Administration (FHA) loans
• Department of Veterans Affairs (VA) loans
• Department of Agriculture loans
• Down payment assistance from state and municipal programs
• Private loans
• First-time buyer programs created to lower the barrier of entry to home ownership
Remember that lowering your down payment generally increases the amount you will pay in a mortgage each month. So, if you have a high income but low savings, a small down payment can work well for you. However, if your cash flow is tight but you have some savings, it may make sense to put more money down and lower your monthly payment accordingly.
Study Mortgage Rates Against Your Income
As well as checking down payment options, you need to see what mortgage rates you will be able to qualify for. As mentioned above, your down payment will figure heavily in your mortgage rate, in addition to your regular income. You can calculate mortgage rates easily online via lender websites or you can talk to a realtor too.
Set Up a Down Payment Fund
Once you have a good idea of how much you need to save, set up a separate bank account or investment account (see below) for your down payment fund and other related homeowner costs (like moving, insurance, and repairs). This keeps you from dipping into your fund accidentally and makes it easier to track your progress.
Estimate How Long It Will Take to Reach Your Down Payment Goal
Take a look at how much you are saving every month toward your home-buying goal, and calculate how long it will take until you have enough for a home purchase. For example, if you need to save $12,000 in total, and you’re putting aside $500 per month, it will take two years to meet your down payment goal. You can increase your savings by paring down your spending, starting a side hustle, or taking on extra hours at your current job.
Consider Investing to Grow Your Fund Faster
If it seems like it’s going to take forever to reach your home funding goal, consider investing some of the money to help it grow faster. You can put it in an interest-bearing account or invest directly in the stock market or in a mutual fund. Keep in mind that high-yield investing typically carries more risk, while more stable investments may not pay off as highly–something a financial adviser can help with.
Keep Monitoring the Market
As you save for your new home, keep an eye on the market. Prices will fluctuate, and you may have to adjust in response by looking in new areas, changing your criteria, or jumping on a deal if prices drop suddenly and you’re in a position to buy.
You can reach your goal of buying your first home if you follow the steps above and stick with it. Before you know it, you’ll be a homeowner and feel the victory of seeing determination and hard work pay off.