Many people dream of becoming homeowners. Whether it’s for the security, expanding your family, or investing, everyone has their own unique vision of owning a home. But it doesn’t happen overnight. Purchasing a house can be a long, expensive process. There are closing costs, a down payment, fees, and insurance that will need to be paid at closing. Not to mention costs like home repairs, mortgage payments, and others that homeowners are responsible for well after the keys are in hand.
You may be feeling overwhelmed at the thought of securing the funds to achieve your dream of homeownership. It’s normal to ask yourself, how can I save for a home? That’s why we’ve compiled a list of ways to save and manage your money so you can be one step closer to buying your own home.
1. Make a budget
Arguably the most important step to saving for a house is creating a balanced budget. Your first goal should be to understand how much you’ll need to save in order to purchase a home. When you’re just beginning your homebuying journey, you’ll want to get a realistic expectation of what your down payment and monthly mortgage payments could be.
Once you have an estimate of how much money you’ll need to purchase a home, you can create a budget and start saving.
Track your income and expenses
Whether you decide to use an app, lay it out in a spreadsheet, or go old school with pen and paper, you should track your income and expenses. If you don’t have a clear picture of where your money is going every month, it’ll be near impossible to divert money toward saving for a house. Here are some steps you can follow to get your budget started:
- Calculate your monthly take-home pay (note, that lenders will look at your gross pay, but for budgeting purposes it’s best to use your net pay)
- Add up your recurring expenses and current debts (car payments, bills, grocery expenses, etc …)
- Subtract your recurring monthly expenses from your take-home pay (don’t forget to factor in expenses like dining out, entertainment, subscriptions, etc …)
- Based on your remaining monthly funds, set your savings goals
2. Look for ways to reduce expenses
There are all kinds of ways to cut back on your monthly expenses so you can filter money into a savings account for a home purchase. It’s easy to overspend without even realizing, so here is a list of ways to cut expenses and start saving:
- Cancel recurring subscriptions
- Take steps to save on utility bills (turn off lights and unplug electronics when not in use, adjust A/C or heater temperature settings, and other things that may be inflating your monthly bills)
- Save on groceries by meal planning, couponing, and shopping generic
- Shop around for lower insurance rates
- Limit/reduce credit card spending
- Avoid the temptation to order takeout
- Shop used and second-hand
3. Look for ways to increase your income
When you’re saving money for a home purchase, it’s also worth looking into ways to add to your regular income. It can be as simple as selling items you no longer use or picking up extra work if your schedule allows it. In our modern “gig economy” it’s easier than ever to earn extra funds on your own time. However, you must have two years of documentation related to your supplemented income in order to qualify to the mortgage payment. Here are few ideas to help you get started:
- Pick up freelance work: This type of work allows you to complete individual projects or gigs for clients. If you have skills as a writer, artist, photographer, programmer, and more you can use them to put more money in your pocket. There are many online resources and websites to help you find projects and clients.
- Drive for a rideshare company: Apps like Uber and Lyft are a great way to supplement your income. You have the ability to drive on your own schedule whenever it’s convenient for you. If you’re hesitant about having strangers in your car though, you can opt to drive for food delivery companies instead. UberEATS, DoorDash, and Instacart are just a few options available.
- Start pet sitting or walking: If you’re an animal lover, consider offering services to other pet owners in need of assistance. Pet sitting for travelers or walking dogs for busy workers can be a lucrative (and fun) part-time job. You can build a network of family and friends with pets, or try signing up as a sitter on an app like Rover. Don’t be afraid to offer your services on neighborhood Facebook groups, too.
If you’re too short on time to start a part-time job, it’s worth asking for a raise at your day job or picking up overtime shifts while you’re saving.
There are many ways to save for a home, and just like the homebuying journey itself, your timeline will be unique to your situation. Start by crunching the numbers and setting a savings goal — that way you can confidently adjust your lifestyle and spending. If you’re ready to start the home purchasing process ASAP, be sure to get in contact with a lender and ask about loan pre-approval. The right lender will help you crunch the numbers so you know exactly what expenses to expect.