Most people have big dreams for buying a house one day, whether it’s a brand new one that they build or an old one that they renovate. The thing is, most people don’t earn a great wage, and the rest are in debt – or both! The idea of ever affording a dream house is too distant for many people, but there are ways you can do it.
You can use the calculators on MortgageCalculator.Org to work out what your expenses should be if you have a mortgage, and you can then plan your finances accordingly. If you’re currently sitting wondering whether you should (or can) save for a house, then consider the five steps for saving for a new house below. Let’s take a look!
1. Think About Budget First
Before you can even look at a new house, you need to know the budget you should set aside to afford it in the first place. Your bank may tell you a figure that’s different to what you can afford, but you need to know your housing costs with your insurance, mortgage, taxes and more. Once you have an idea of your budget, you are going to be able to figure out your down payment.
2. Pay Off Your Debts
You should never pay more than a third of your income on housing, and if you are, then you’re not using your money as well as you should. That spare income you could have could be going towards your debts. Paying them off will improve your credit score and it will work in your favor when it comes to securing a better mortgage rate.
3. Play Pretend
Let’s say that your new mortgage is a little more than your rent. You should start budgeting as if you’re paying that new mortgage already and get used to the expense of it. If you do this, you can start looking at what your budget could look like with the right expenses. Paying your future mortgage will get you in practice, so it’s like playing pretend!
4. Pay Your Pocket First
Don’t wait until the end of the month to see what you have left over for a mortgage. Instead, put your savings into your bills straight away and pay your savings first. If you do that, you’re going to be able to get a mortgage right away, and it will take some time to get used to, but you’ll get used to it quickly until it becomes second nature. It’s tempting to dip in from time to time, but you can put your savings in a different bank instead.
5. Move Your Expenses Down
Reducing your expenses takes time to get used to, but once you do it, you can save a ton of cash you didn’t expect to save. For every grocery shop you pay for, reduce it by $40-50 if you are able to. In the grand scheme of things, you can reduce it and save yourself a few treats per week, and it’ll make a huge difference to the way that you save.