Routing # 256078446
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How to Save for a House: Strategies for First-Time Buyers
What you'll learn: Tips on saving for your first home, how much to save, budgeting tips and more.
EXPECTED READ TIME: 4 MINUTES
April 2, 2024
For first-time buyers, the home buying process can seem overwhelming and confusing to navigate. You probably have a lot of questions running through your mind. Where do I start? How much do I need to save to buy a home? How do I save for the down payment?
It is exciting, and a little scary, to think about. If you are unsure of where to begin, these tips for first-time buyers will help you get started on the road to your home buying journey.
Set goals and start saving ASAP: How much should I save for a house?
From the get-go, it is important to decide what your savings target is and set a deadline to meet it. There are a few up-front costs to consider. Here are the main ones you need to save for:
How much to save for a down payment: The amount you are required to pay on the down payment will depend on the type of mortgage you choose and the lender. As a first-time buyer, there are conventional loans available to those with excellent credit that require as little as 3% down. Once you have determined your price range and goals, then set up automatic transfers from a checking to savings account to get started.
How much to save for closing costs: These are the expenses and fees you have to pay in order to finalize a mortgage. Typically, they range from 2% to 5% of the loan amount. In a buyer’s market, you may be able to ask the seller to pay for a portion of your closing costs. Plus, you can save on expenses such as home inspections by shopping around.
How much to save for move-in expenses: Do not forget to budget for moving costs in the midst of the buying process. Local moves typically run up to $2,500, while long-distance moves can be much pricier. You will also want to set aside cash for immediate home repairs, upgrades, and furnishings.
Home buying budget: Review your current expenses
If you are not already tracking your monthly spending, now is the time to start. That way you can see where your cash is going throughout the month and find opportunities to cut unnecessary expenses while you save for a home.
No, you will not have to give up your daily coffee from your favorite café. The cost of your day-to-day delights will not make or break your home-saving budget. However, you may want to consider downsizing other expenses to help you save for a house faster. Here are a few things to start looking at:
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Compare different car insurance rates to find the best deal
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Look into bundling your cable and WIFI services
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Consider changing to a different cell phone plan
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Cancel the subscriptions you are not using or forgot you signed up for
Check your credit score: How to improve credit score to buy a house?
If your credit score is under 680, you may want to consider taking action to improve your credit score while you save for a home. Credit scores above 680 usually qualify you for a lower interest rate and often determines whether or not you qualify for a mortgage. There are a few steps you can take to help polish your score:
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Get free copies of your current credit reports from each of the three credit bureaus: Experian, Equifax, and TransUnion. You can review and dispute errors that may be affecting your score.
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Be sure to pay all of your bills on time.
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Keep your credit card balances as low as possible.
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Do not close any of the credit cards you have open as closing a card can lower your score.
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Avoid opening new credit accounts while applying for mortgages to avoid hard inquiries on your credit report.
Automate your home savings account
Setting up automatic transfers from your checking to a savings account is a great way to keep that money out of sight and out of mind while saving for a new home. That way, you are not using it for immediate purchases and building on your savings with each paycheck.
What is the best savings account for first-time home buyers?
When saving for a home, look into high-yield savings accounts. You can even open a money market account or certificates of deposit instead.
Save your refunds, bonuses, and raises
Commit to transferring any tax refunds, bonuses, raises, and other financial upticks to your savings instead of spending them. It will help give your home buying money a boost and help get you that much closer to homeownership.
Stay committed to making progress
Even a small down payment can seem challenging to save. For example, a 3% down payment on a $300,000 home is still $9,000. Plus, the closing costs on that same home could range between $6,000 and $18,000.
It is important to set your price range early and stick to your budget. The progress may feel slow and steady, but it is worth celebrating every milestone you hit as you get closer to accomplishing your first home purchase.
SIMILAR ARTICLES
Conventional Loan Down Payment
How much down payment do you need for a conventional loan? Get the answer to that and learn more about conventional loans.
How Much House Can You Afford? And How Do You Figure It Out?
Learn about how to use a mortgage affordability calculator and other factors that go into a home loan.
Mortgages 101: What First-Time Homebuyers Need to Know
Learn the factors that influence mortgage rates and gain insights into rate locks, discount points, and lender credits.
First Time Home Buyer Mistakes – Things to Avoid
Explore the top mistakes first-time homebuyers make and tips to ensure a smooth first time buying experience.
Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.625 discount point, which equals 0.625 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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