Whether you’re buying your first home or you’ve owned one for years, finding a new home you love is an exhilarating feeling. But it’s also a huge investment — the median value of a single-family home in Pennsylvania was $170,500 between 2013 and 2017, and this number doesn’t account for the additional costs homebuyers may be required to take on when purchasing a home, such as realtor fees, property taxes, maintenance, and home insurance. The process requires a significant amount of planning and budgeting.
With a little creativity, you can find many ways to save for this significant purchase. The four tips below can help you start your journey toward affording your dream home.
Before you can start saving for your new home, you need to know how much you can afford.
Creating a budget is the first step in determining what you can reasonably spend on a down payment and monthly loan payments. If you haven’t done so already, review your bank account statements and monthly bills. Then use a mortgage calculator to determine what you can afford to pay each month after subtracting your current expenses.
To get a better understanding of what you’ll be able to afford comfortably, contact your mortgage lender. They can tell you what kind of mortgage you’ll qualify for based on your income, debt, and credit. It’s also a good idea to check your credit score during this planning phase. If your score needs some work, now’s the time to start taking steps toward improving it.
You’ll also need to consider the timeframe of when you’d like to purchase your new home. Do you have years to save up for your move, or are you planning to purchase your home in a matter of months? The shorter your timeframe, the more you’ll need to save each month.
After determining your budget and timeline, you might find that you need to cut back on certain expenses to afford the home of your dreams. Look at your current debt to pinpoint any areas in which you can make substantial changes, such as transferring credit card debt to a lower-interest card or refinancing an auto loan. Changes like these can potentially add up to hundreds of dollars saved each month that you can put toward your housing budget. Keep in mind that these changes may impact your credit score, so speak with a financial advisor to make sure the changes are in your best interest.
Getting a second job can be one of the surest ways to save money quickly. Whether you take part-time work at your local supermarket or a seasonal position at the mall over the holidays, working more hours can help you earn additional income that you can fully devote to your new home’s down payment.
Many people worry that a second job will cut into family time or their recreational activities, but this doesn’t have to be the case. If a second job outside of the home isn’t the right fit for you, you can turn your passion into a profitable hobby from your home computer or living room. Freelancing after your family goes to bed or selling homemade goods that you create with your significant other can be the perfect way to save up for a house without giving up time with your family.
Putting the full amount of your projected future mortgage payment into savings each month, or the additional amount you’ll be paying on top of your current housing expense, prepares you for the expense of home ownership. You’ll quickly find out whether you can comfortably afford the cost of your monthly bill.
Create a savings account specifically for your new home to put aside the equivalent of these new or additional expenses each month. Then, set up automatic payments so that you won’t forget to deposit money into the account, and put in any additional bonuses, raises, or monetary gifts you receive. If you have direct deposit, you can split your paychecks into separate accounts — one for your home and one for everyday expenses. If you’re a PSECU member, we make it easy to designate separate shares to meet your savings needs.
For some extra money to put into your new savings account, consider using a cash rewards credit card like PSECU’s Founder’s Card. You can earn 2%* or 1.5% cash rewards on purchases – including any monthly bills you put on your card – which you can easily transfer to your savings share.
If you won’t need to access your savings for months or years, consider opening a certificate.
A credit union certificate is the equivalent of a bank Certificate of Deposit (CD). It’s a smart option if you don’t need instant access to your money and want to earn higher dividends (interest) on your money than you can with a savings account.
PSECU offers flexible certificate terms so that you can access your money in a timeframe that meets your needs. Since you won’t be able to access your money until the predetermined date, you won’t be tempted to spend your savings on other expenses.
Saving enough money for a down payment is entirely possible – even on a tight budget. But it does take planning and dedication to get there. We hope these tips inspire you as you work toward purchasing your dream home.
Are you ready to take the next step and secure your mortgage? We’re here to help. We offer competitive rates, flexible terms, and services tailored to your needs, giving you peace of mind every step of the way.
Apply for your mortgage today to enjoy the benefits of a PSECU home loan. For more tips on how to save for your house’s down payment, check out our WalletWorks page.
*You can earn 1.5% cash rewards on purchases. You can earn 2% cash rewards on purchases if you maintain a PSECU checking account and qualifying monthly direct deposit(s) of at least $500. See the Visa® Founder’s Card and Visa® Alumni Rewards Card Rewards Program Terms and Conditions for full details.