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June
8

Buying a home typically requires some upfront costs. Here's how much you'll need to put aside.

You want to become a homeowner, but you're not sure if you have enough money saved to buy a house.

It's important to understand the costs associated with buying a home to understand how much money you need to save. Our real estate agents suggest considering the following costs when calculating how much you need to save:

  • Your Downpayment: A conventional mortgage usually requires a downpayment between 5 and 20 percent of your home's purchase price, but it's possible to get a mortgage with a downpayment as low as 3.5 percent.

You decide that you want to buy a $400,000 home and want to make a downpayment of 5 percent; this means you'll need $20,000 for your downpayment.

  • Your Loan's Closing Costs: There are closing costs associated with purchasing a home; this includes items like your home inspection, home appraisal, and loan fees.

Closing costs usually equal 3 to 4 percent of your home's value. For a $400,000 home, this is $12,000-$16,000.

  • Moving Expenses: The cost of moving your belongings depends on how far you're moving your stuff and how much of the moving process you want to handle yourself. Plan on spending around $2,000 for a local move.

Your total estimated homebuying costs are between $34,000-$38,000. Before you start looking at Southport homes for sale, you need to create a savings plan.

Making Your Savings Plan

Now that you know how much you need to save, you should decide when you're hoping to meet your goal. Then, you can calculate how much you have to save each month and brainstorm options for increasing your income or lowering your expenses.

Assume your house savings goal is $35,000 and that you want to meet your goal in two years. This means that you'll need to save $1,458 a month.

  • You decide to work extra hours to earn $700 extra a month. This means that you still need to find $758 to meet your savings goal.

  • After reviewing your expenses, you opt to lower your budget for eating out and fun activities by $150 a month, downgrade your streaming services (a savings of $100 a month), reduce your spending on clothing and personal care by $100, and join a cheaper gym (a savings of $50 a month). This gives you $400 to put towards your savings goal, but you're still short $358 a month or $4,296.

  • You typically get an annual tax refund for $2,000; you decide to put this towards your savings goal, leaving $2,296 a year or $191 a month.

  • Upon further reviewing your budget, you opt to skip a big vacation for the next two years (a savings of $2,300 each year) and instead divert this money to your savings. You've now met your house savings goal!

Remember, the cutbacks or extra work required to meet your savings goal aren't permanent. In fact, many financial gurus recommend working to meet your goal in two years or less to prevent burnout.

By diverting unexpected income windfalls and strategically reducing your expenses, you can meet your savings goal faster than you ever anticipated.

Ready to start looking for your ideal home? Contact us today to get started!