When most people picture saving for a house, they automatically assume they need to cut out all fun and pinch every penny. While it is true that the more you save, the quicker you can buy a home, you don’t need to eliminate fun completely. The recession-proof secret to saving for a house is simple, but you’ll need to come in with the right headspace and research. You can make the savings leap without affecting your stress levels at all.

Research the Market

Before you start the homebuying process, you’ll need to do some research to familiarize yourself with the market. Research can help you make more informed decisions when it comes to comparing lenders, setting savings goals, and choosing a location to buy your home. Learn what national and local interest rates are on average; certain lenders and mortgages may have varying interest rates, and knowing the average can help you compare. Research average home prices in different areas to understand where you’re more likely to afford a home; be flexible and consider the pros and cons of each location. Know your financing and lending options, too. Certain mortgages are easier to qualify for. Lenders like Arnaiz Mortgage can help you choose which options work best for your income level, credit score, and desired location.

Track Your Finances

The basic first step to any savings plan is to track where your finances come from and where they go. Add up all of your income for a month. Track each expense you make, including bills, utilities, and housing. If you make more than you spend, you’re on the right track. Eliminate unnecessary spending whenever possible. You don’t have to cut out indulgences completely, but aim to dedicate a large portion of each paycheck to savings. The less you spend each month, the more you can save. You can use savings apps, programs, spreadsheets, or paper budgets to make tracking easier.

Set Specific Goals

When you’re equipped with real estate market research, you’ll know more about how much you need to save. Traditional mortgages usually require saving at least 20% of a home’s purchase price for a down payment, but you can put down less if you don’t mind having mortgage insurance. Set a goal for how much money you want to put down—this number will vary depending on how much your target home price will be. Mortgage calculators can help you determine how much home you can afford. Outside of your down payment, you will also need to factor in other closing costs and fees. Having something specific and tangible to work toward can help motivate you to save.

Utilize High-Yield Savings

Putting your money in a savings account is a smart choice, but you should consider all of your savings options. If you don’t think you’ll need to withdraw from your savings account often, you can lock in a Certificate of Deposit (CD) or a high-yield savings account to increase the interest you earn. These high-interest savings options can help you save faster while keeping your funds safe.

Automate Money Transfers

It’s easier to save when you don’t have to think much about it. Consider setting up automatic bank transfers regularly into your savings account. You don’t have to worry about manually transferring money from each paycheck, allowing your savings to grow with little effort on your end. It’s easy to forget or put off transferring money to savings; automating removes this issue entirely.

Work on Your Debt

Purchasing a home isn’t just about how much you can save; debt lowers the amount you can afford exponentially. Lenders will look at your debt-to-income ratio to determine how much you can borrow, so you’ll want to eliminate as much debt as you can. Factor in paying off debt as part of your savings plan. The less debt you have, the more you can borrow, and the less financial stress you’ll have.

Increase Your Income

If you’re having trouble saving money even after eliminating unnecessary expenses, you may need to bring in more income. Additional income can look like taking on additional shifts, adding a second job, or transitioning to full-time work. Switching careers may help you bring in more money, but this can take extra effort and time. Side gigs can help you earn money on the side, like ridesharing or stock investing. Assess your schedule to determine what more you can take on in addition to your job, if applicable.

Conclusion

Saving for a home may seem intimidating; after all, it’s likely one of the biggest purchases you’ll ever make. There are options, however, for buyers of all income levels and financial backgrounds. You don’t have to put 20% down if it’s not feasible. As long as you’ve done research, tracked your expenses, paid down your debts, and increased your income as much as possible, you’re on the right path to smart savings.