How To Start Saving And When To Buy Your First Own Home

Owning a home is a common financial goal for many people to achieve. Many people have to work quite hard to achieve the dream of owning their own home.

Just coming up with a strategy can be a demanding endeavour in and of itself. To achieve this goal, one must have a clear understanding of their financial flow and requirements.

First and foremost, you must decide when you want to buy a house. It’s critical to get a head start on preparations by planning ahead of time. Start saving for a house when you’re 25, and you’ll be able to buy one in 7-10 years if you plan.

An ideal investment provides a larger return than inflation. If you want to buy a house in the next seven to eight years or more, you should put your money in equity funds rather than debt-based ones.

Compounding helps you earn bigger returns and develop a larger portfolio over time. It’s undeniable that getting a mortgage takes some weight off your shoulders.

The down payment on the house, on the other hand, is a significant sum. Furthermore, the highest loan one may get up to 80% of the value of the home. Therefore you’ll have to save up for the remaining 20% of the purchase price in advance.

Let’s have a look at an illustration of this. In the next ten years, Mr. Sanjay, 26 years old, wants to buy a house. Assume that the house costs Rs 1 crore now.

The identical house would cost roughly Rs 1.97 crore in 2029, assuming a 7% annual inflation rate. If he takes out an 80 percent loan, he’ll have to start saving for the remaining 20 percent, or about Rs 39 lakh, to pay back the loan. He needs to set aside and invest Rs 17,000 every month to achieve this goal (considering a 12 percent p.a. return).

Start saving as much as you can as early in life and as much as possible. You can begin with a little SIP and gradually grow it by 10% – 20% each year. This will make it much easier for you in the long run to build the corpus you seek.

Find out about the cost of living in the area.

Before you can calculate how much to save, you’ll need an idea of how much your dream home will cost. Find out the average price per square foot in the region by looking at sites like Zillow, Trulia, or Realtor.com, whether you’re planning to stay in the same city or relocate across state borders.

Determine whether you are eligible for a federal loan.

The United States federal government offers house loans with smaller down payments and better interest rates than conventional loans. You may be eligible even if your credit score is worse. The following are the three kinds of government-backed mortgages available:

A 3.5 percent down payment and a credit score of 580 are required for an FHA loan. Even if your credit score is 500 or lower, you may be able to get a loan with just a 10% down payment.

Veterans Affairs mortgage: 

A Veterans Affairs mortgage is only available to former service members and their spouses and dependents. There’s a chance you won’t have to put any money down at all.

The United States Department of Agriculture offers low-to-moderate-income buyers in rural areas the opportunity to get a USDA mortgage. There’s no money down.

If you qualify, government loans are an excellent alternative because they allow you to put down less money on a home sooner.

Plan ahead of time for Unexpected Costs

As with a new rental, you’ll need to plan for expenses like fees, taxes, and utility costs. Cash expenses include homeowner’s insurance, closing costs, and property taxes.

Not to mention the price of utilities, repairs, renovations, and furniture Additional costs to consider saving for include the following:

Your mortgage lender orders appraisals to determine the value of your home. For a single-family dwelling, the price ranges from $312 to $405.

The cost of a single-family home inspection ranges from $279 to $399. According to what you need to be checked and how detailed your report has to be, prices vary. For example, if you want an expert to review your foundation, you’ll probably have to pay more.

Fees for realtors: 

The realtor fee in some states is 5.45% of the home’s buying price. The seller may foot the bill for your realtor’s services if the market is favourable. In other places, hiring a lawyer to review your purchase agreement is more typical, and it’s usually less expensive than working with a realtor.

A home appraisal determines the value of your house, and your mortgage lender frequently requests it. For a single-family home, the price ranges from $300 to $400.

Be as efficient with your savings contributions as possible.

It’s far easier to talk about saving for a new house than it is to do it. If you want to keep on track, open a savings account with a high yield initially.

Check-in on your savings target every month until you’ve reached it, and then start automating contributions. You can treat this payment as a regular monthly expense by setting up automatic savings installments.

Spend less and Save more at the same time. Analyze your spending to determine where you might save money or do without. You might save $200 a month on a gym subscription by setting up your home training studio.

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