To save money for a house is one of a first-time home buyer’s most challenging financial hurdles. But once you achieve this milestone, you can unlock the many benefits of owning real estate. 

When it comes to affording a house, having enough money for the down payment is critical. 

Bringing enough cash to the closing table makes the buyer’s offer the most competitive and makes it easier to qualify for the loan. It also pays down the loan enough to eliminate mortgage insurance and lower interest rates. 

How do home buyers save for a house, and how much should they put aside for the down payment? This guide will help first-time home buyers, and homeowners bring enough cash to the closing table.

For First-Time Buyers

If you are currently renting and are looking for a home, it’s essential to find a house within your budget. With rising interest rates and stricter post-2008 loan qualification terms, it’s more important for buyers to be financially fit. Thankfully, with the proper preparation, you can buy a house with a loan or even all cash.

Before you buy a house, prepare your finances by improving your credit score, lowering your debt-to-income ratio, and putting more money in the bank. This all culminates toward your primary goal of having enough for the down payment. 

Bringing enough money to closing will boost your lender’s confidence and improve your future mortgage payments. Though there is a lot of talk about paying 20% of the home sale price, you don’t actually need to save that much to qualify. In fact, many buyers don’t pay that much. 

If you have a good credit score and enough income, you can qualify for a conventional loan with as little as 3% down. While we do advise you to save more for easier qualification and better rates, it is possible to offer that little with this kind of loan.

There are also circumstances where you may not even need a down payment. If you’re an active-duty service member or veteran, you may apply for a VA loan which can accept zero money down. If you’re not in the military, then it’s also possible to put zero down with a government-backed USDA loan. Speak with your lender to find out all your options based on your qualifications, work history, and financial profile.

Are Closing Costs Holding You Back?

Another large expense that first-time buyers don’t know about is closing costs. These fees can amount to 3 to 6% of the house’s total value, which adds to thousands extra at the closing table. The buyer typically pays this in a seller’s market, while in a buyer’s market, the buyer can get some help from the seller. However, if the closing costs are holding you back from offering a more competitive down payment, you can apply for a no-closing-cost mortgage through your lender. This option will roll the fees into your loan in exchange for a higher interest rate.

Saving for a Down Payment as a First-Time Buyer

Now that you know some options where you don’t have to bring 20% to the closing table, here are some tips on saving as much money as you can. Overall, do your best to increase your income and spend less. We know this is easier said than done, so here are some practical tips.  

  • Get control of your subscriptions. Modern life has us sign up for various subscription services and streaming channels that we may not even need. Thankfully, there are subscription-canceling apps that help consumers gain ground. 
  • Increase your income. You may ask for a promotion, change jobs, or get a second job part-time and put all the proceeds in savings.
  • Pay off debt. Car payments and student loans can stunt your savings potential. Pay off these debts first to make saving easier.
  • Skip vacations or make shorter trips. There are many ways to relax without spending thousands on plane tickets and hotels. Find local places to unwind for a season, and your wallet will thank you.
  • Examine your budget and trim the excess. Ask yourself what you truly need and eliminate the items in your budget that take away from your savings. Downgrade your internet plan, cut the cable, trim some devices off your cellular plan, or cancel that spa membership you don’t use frequently. It all adds up!
  • Automate if you lack discipline. It can be tough to save if you want to spend money as soon as you see it. Fortunately, you can automate part of your paycheck into a separate account, so you don’t get the urge to spend.
  • Get a roommate. Your own home, even if it’s a rental, can become a source of collateral. If you have an extra room in a house, you can rent it (with your landlord’s permission). 

For Homeowners Looking to Save Money For Their Next Home

If you already own a home, then your path should be similar to a first-time buyer. Save money, work on your credit score, and fine-tune your debts vs. income. However, you have one significant advantage: already owning a house. This means you may have enough equity to take out the large sum you need for a down payment at closing without any extra work. 

Ask Marketplace Homes about our special incentive programs like Sell and Stay that can make your next offer more competitive. We can buy your home, give you the sale proceeds, and even let you stay in your current home until the deal is complete. 

To find out more about our special incentive programs or to speak with one of our real estate agents, contact Marketplace Homes today. 


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