Have you been thinking about buying a house lately? Me, too.
As a child the home I lived in was secluded. It was back a long driveway and surrounded by about 7 acres of woods. My brothers and I would walk through the woods, play in the creeks, go fishing, and ride four wheelers nearly every single day.
And that’s how I want my kids to grow up.
I’m getting sick of having neighbors and all that comes along with that. You know – having to get dressed before putting the dog outside. I just don’t like the fact that when I’m hanging out outside a handful of neighbors can see me.
The secluded country – that’s the spot for me!
If you’re in my position, daydreaming about buying a home, it’s time to put a plan in action. Here’s a four step process for saving for a home.
Let’s dig in.
Figure Out What You Want
Before you can determine what you need to save you first have to determine what exactly you’re looking for.
In my case this is what I want:
- 3 Bedrooms
- 2 Bathrooms
- At least 1500 square feet
- 10+ acres of wooded land
Those are my must haves. Obviously, I want a decent home but I am much more worried about the actual piece of property itself. Homes can be renovated with time. All I need is enough bedrooms for myself and two daughters, two bathrooms, and a home with a good layout that is at least 1500 square feet.
Once you have your list of must haves log onto real estate sites and start looking for houses that fit your criteria in locations that you love. (To easily see homes in your area search the multiple listing service, referred to as the MLS. From there you can enter in exactly what you want.)
When I enter in my criteria I see homes that fit the bill for around $150,000 (Keep in mind I live in rural Ohio. Home prices are very low here.)
Now head on over to a home mortgage calculator and see what the monthly mortgage payment would be (Don’t forget to factor in homeowners insurance and property taxes). If the price is out of your ballpark you’re going to need to revise your criteria.
Determine Your Initial Costs
To avoid private mortgage insurance (read: an added expense you don’t want to pay) you’re going to need a down payment of at least 20 percent. You’ll also need money for closing costs (approximately 2-5% of purchase price) and the first years’ worth of homeowners insurance.
In my case I would need
- Down Payment: $30,000
- Closing Costs: $5,000
- Homeowners Insurance: $1,200
But just to be safe I’d bump that figure to $40,000.
You should also have an emergency fund filled with 3-6 months’ worth of savings on top of this. You don’t want to buy a house without an emergency fund.
Set a Time Frame
How long can you wait until making your big purchase? That’s a very important question and will determine how much money you should be saving each month.
For me, I think about 2 -3 years would suffice.
The longer you have to save the more you can save. It’s important that you set a realistic time frame.
Break Down Your Savings Goals (And Adjust if Necessary)
In my example I’d like to buy a house in two years and I need $40,000 to do so.
I’ll take $40,000 and divide it by 24 months. The result is saving $1,667 per month. Right now I only have an extra $750 per month that I can save.
So I have three choices – extend my timeframe, look for more ways to bring in money, or do a combination of the two.
If I saved for three years I would need to put away $1,111 per month. That’s more realistic and a much better fit for me.
Look for More Ways to Save
If you really want to speed up your savings be on the lookout for more ways you can bring in money. Can you work more hours? Freelance? Start a side business? There are tons of ways you can increase your income if you’re willing to put in the hard work.
Don’t forget to add one time windfalls like income tax refunds, cash gifts, and work related bonuses to your house fund. This will allow you to lower your monthly savings amount while staying on target.
Are you saving for your first home? If you’re a homeowner how much did you put down and how did you about saving?
Photo Credit: PhotoStock
Alexa Mason is a freelance writer and wanna be internet entrepreneur. She is also a newly single mom to two beautiful little girls. She chronicles her journey as a single mom trying to make it big at www.singlemomsincome.com.