How to Save for a House

Saving for a house means taking control of your finances.

The idea of buying your dream home might seem more like a wishful fantasy if you have no clue how you will stash away enough money to make it a reality. If you are worried about saving up enough to buy a home, you aren’t alone. Coming up with the money for a down payment is one of the most intimidating—and scary—factors for people who hope to become homeowners. The good news: there are some great strategies to help you save for a house.

Simple Ways to Save Up Money for a House

Track your spending and expenses.
This is the something you should be doing anyway. Use an app or online tool that tracks your spending and keeps a running total of the amounts you spend on specific items or categories. Tip: it’s easier to track spending if you use plastic for everything. Most people find this process quite eye-opening, as it’s easy to lose track of a how much you spend on frivolous purchases or small items throughout the week. But spending even a few dollars at a time on luxuries or convenience items can really add up.  Finding out where your money goes is the first step in figuring out how to keep more of it in the bank.

Make a budget—and stick to it.
Once you evaluate your spending, you will likely spot places where you can cut back or eliminate extras. This may be challenging—sticking to a strict budget often isn’t a lot of fun. But just keep focusing on your end goal. Some belt-tightening now is a minor sacrifice that will quickly be forgotten when you are getting the keys to your new home. If you suspect you will feel really deprived or get discouraged, work a few small yet rewarding “splurges” into your budget to keep your spirits up—but see if you can cancel out the costs of these small treats by saving an equivalent amount elsewhere in your budget.

Be a deal hunter and savvy consumer.
You’re tracking everyday spending, but don’t overlook those recurring monthly expenses, too. Put those monthly bills under a microscope. There’s a good chance you are paying for services and features you don’t really need. Call your service providers, credit card companies and other businesses you pay every month and see if they can lower your rate or offer you a better deal.

Keep your down payment fund on lockdown.
When you are saving up to buy a home, that savings account should be considered untouchable. Barring a major emergency, don’t even toy with the idea of spending any of that money until you are ready to purchase a home. It’s easier to keep an off-limits down payment fund if you set up a separate account dedicated solely to this purpose. Think of this account as being a one-way street: funds should go in, but never come out—at least, not until you are ready to write out that down payment check.

Look for ways to boost your income.
Your budget consists of two parts: money coming in, and money going out. You’ll get the best results if you make improvements on both sides. See if there are opportunities to work extra hours. You may even want to consider a part-time job. Think about skills or talents that you could parlay into freelance income.

Exactly how much will it take to buy the home of your dreams? Give me a call 586.907.1206

Top 10 Home Loan Tips

Buying a home can be a fun and exciting experience. But finding the right home is just one step in the process. Choosing the right home loan can be just as important. Here are some tips to help make finding the right home loan as easy as possible.

Tip #1 – Start saving for a down payment

Depending on your lender and the type of loan you choose, your required down payment can range from 3% to 20% of the purchase price of the home. Establishing a monthly budget will help you put away enough money for your down payment.

Once you’ve assessed what your budget will support, consider having money automatically deposited from your paycheck or bank account to a savings account to make it easier and more convenient to put aside money each month.

If you won’t be able to come up with a large down payment, then you should look into an FHA loan, which helps home buyers who can only make a small down payment.

Tip #2 – Check your credit score

Having a good credit score puts you in a position to attract the best deal on your home loan. So it’s a good idea to obtain a copy of your credit report before starting the home buying process. You will see what your credit profile looks like to potential lenders and can then take steps to improve your credit score if necessary.

You can receive one free copy of your credit report each year from each of the three major credit reporting agencies – Equifax, Experian, and TransUnion – by visiting www.annualcreditreport.com. If you pay a small fee to the reporting agency, the credit report you receive will also include your credit score.

Tip #3 – Get your financial documents in order

When you apply for a mortgage, you will need to provide your lender with a number of financial documents. Having these documents already assembled will help accelerate the processing of your loan application. At a minimum, you should be prepared to provide your last two pay stubs, your most recent W-2, your last two years of tax returns, and current bank and brokerage statements.

Tip #4 – Utilize a mortgage calculator

Mortgage calculators are great tools for helping you understand how much home you can afford. They are very easy to use and can show you how much your monthly mortgage payment would be under different home price, down payment and interest rate scenarios.

Tip #5 – Learn how to compare offers

All mortgages are not created equal. Even if loans have the same interest rate, there could be differences in the points and fees that make one offer more expensive than another. It’s important to understand all of the components that go into determining the price of your mortgage, so you can accurately compare the offers being made. One thing you should compare lender to lender are loan estimates. With the new regulations; the government has required lenders to make the mortgage quotes aka loan estimates more easily read by consumers.

Tip #6 – Start tracking interest rates

The interest rate will be one of the biggest factors in determining the cost of your mortgage. Interest rates for mortgages change almost every day and it is helpful to know which way they are heading.

Tip #7 – Get pre-approved not prequalified.

Yes there is a difference believe it or not. The difference of being pre approved and prequalified is one thing… your documents being reviewed by your loan officer for a pre approval. Many real estate agents want you to be pre-approved for a loan before they will start to work with you. The mortgage pre-approval process is fairly simple, usually just requiring some financial information such as your income and the amount of savings and investments you have. Once you are pre-approved, you will have a better sense of how much you can borrow and the price range of the homes you can afford.

Tip #8 – Understand the various loan options

Maybe your parents had a 30-year fixed-rate loan. Maybe your best friend has an adjustable-rate loan. That doesn’t mean that either of those loans are the right loan for you. Some people might like the predictability of a fixed-rate loan, while others might prefer the lower initial payments of an adjustable-rate loan. Every home buyer has their own unique financial situation and it’s important to understand which type of loan best suits your needs.

Tip #9 – Be prompt in responding to your lender

After you have applied for a home loan, it is important to respond promptly to any requests for additional information from your lender and to return your paperwork as quickly as possible. Waiting too long to respond could cause a delay in closing your loan, which could create a problem with the home you want to buy. Don’t put yourself in a position where you could end up losing your dream home, as well as any deposit you may have put down.

Tip # 10 – Don’t mess up your credit during the loan processing

It’s not uncommon for lenders to pull your credit report a second time to see if anything has changed before your loan closes. Be careful not to do anything that would bring down your credit score while your loan is being processed. So, pay all of your bills on time, don’t apply for any new credit cards, and don’t take out any new car loans until your home loan has closed.

When buying a house, Is It Better to Put More Money Down and Borrow Less?

Putting down more cash upfront reduces the amount of money you have to borrow, which means a lower monthly payment. And if you put down at least 20 percent, your lender won’t require you to purchase mortgage insurance, which also reduces your monthly costs. On the other hand, if putting down 20 percent will drain your savings, leaving you without cash for emergencies, it may be better to make a lower down payment.