How to Save Money for a House: a Step-by-Step Plan

Have you always dreamed of being a homeowner? It’s time to turn that dream into a reality. Stop imagining and start saving up for a down payment with this step-by-step plan from the financial advisors at American Investment Planners:

• Step 1: Figure out how much you’ll need to save. First things first, you need to figure out (roughly) how much money you need to save. As a rule of thumb, your housing expenses should not exceed 25-30% of your monthly income. This includes mortgage principal and interest, taxes, and insurance. You should also aim to save at least 20% for a down payment; this much money is not required, but it will help you earn better interest rates.

• Step 2: Open a savings account. Next, you will need to open up a savings account so you have a place to hold your money. Keep this account separate from your traditional savings account or emergency fund, but consider opening it at the same bank for convenient e-transferring capabilities.

• Step 3: Create a budget. Make a detailed list of your monthly income and expenses. After calculating the necessary bills and other costs, how much money are you left with? And how much of this leftover cash can you comfortably put towards your new home each month? Make sure to keep your budget somewhat flexible for unexpected occurrences. You can learn more about creating a budget here.

• Step 4: Make your monthly deposits. Congratulations, you’ve determined how much money you need to save each month to meet your goal. Now comes the hard part: actually saving it. Setting up automatic deposits can help you put away your money before you accidentally spend it on something less important.

• Step 5: Save 100% of your windfall money. We all have those occasional events that bring us some extra cash: holidays, birthdays, special celebrations, work bonuses, and income tax returns just to name a few. Put 100% of this “extra” money towards your new home to help expedite your savings plan.

• Step 6: Check your credit score. When you start to make significant progress on your goal, it’s a good idea to sit down and check your credit score. A better credit score means lower mortgage rates, and since poor scores can take awhile to improve, it is something you want to address as early as possible.

• Step 7: Sit down with a real estate agent. Once the time comes when you are almost at your goal and your credit is in good standing, it’s officially time to sit down with a real estate agent and start looking for a new home. They can help you determine if your savings are sufficient, shop for mortgage rates, and show you qualifying homes in your area. Happy house hunting!

Are you having trouble planning and saving for a new house? The financial advisors at American Investment Planners, LLC can sit down with you and help construct a plan that meets your needs and budget. To schedule an appointment with one of our consultants, please call (516) 932-5130 or email info@americaninvestmentplanners.com.

Things To Consider Before Buying Your First Home

American Investment Planners LLC

500 North Broadway, Suite 260, Jericho, NY 11753

(516) 932-5130 / (866) 932-5130

Growing up, most, if not all, of us go through a stage where we play "house" and pretend that we have our own home to manage and take care of. And though it may seem like just a game to us when we're younger, it quickly becomes reality once we reach adulthood and start to seriously start looking into purchasing a home of our own.

Let's cut right to the chase - buying a home is a huge decision that certainly requires a lot of careful consideration. That said, if you're at the point where you're starting to think about becoming a homeowner, make sure you go over these things before you do anything:

Your income vs. your debts.
Even if your salary is high, that doesn't mean you can go out and purchase the most expensive house on the block. To figure out how much house you can truly afford, you need to take your monthly debts into consideration - how much of that high salary is going to things like student loans, credit cards, and car payments? Once you subtract these expenses from your monthly income, you'll have a much more realistic idea of how much you can put towards a mortgage each month.

Your five year plan.
Or maybe your two or ten year plan - whatever you're currently thinking about at the moment. While you may be financially ready to purchase a home, you also need to consider how your life may change in the future. For example, if you're thinking about finding a new job, you'll have to factor in the chance that your salary may change. Or, if you have plans to go back to school or buy a new car, you'll need to have enough room in the budget for these new expenses.

Your ability to qualify for a loan. 
While you may feel like you can afford a certain home, a lot of the power lies in the hands of lenders. Before they approve your application, they'll look at things like your pay stubs, your tax returns, and of course, your credit history. Knowing this, it's a good idea to look into things like your credit report before you apply to get an idea of where you're at.

Whether you're thinking of purchasing a home here on Long Island where we're headquartered or somewhere else in the country, the team at American Investment Planners LLC would be happy to help you figure out if you're ready and answer all of those financial questions we're sure you have.

To speak with our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.