Saving Up To Buy Your Dream Home

“I really can’t afford to buy a home right now.”

For many people, that’s the number one excuse for not buying a home. Although out-of-pocket expenses—such as the down payment, closing costs, costs of moving and homeowner expenses—are necessary evils, buying a home can indeed be affordable. If you break down your expenses and continue to build up your savings, you can avoid the intimidation factor of purchasing a new home.

Let’s take a closer look at the costs involved in buying a home:

Down Payment – In all likelihood, your down payment will be the single largest expense in the home buying process; the bulk of your saving will probably end up going towards your down payment. Conventional loans may require up to 20 percent of the purchase price as a down payment, but the amount you need to put down will depend on many different factors such as your credit score, the specific type of loan your applying for and the interest rate on your loan.

Closing Costs – Generally, closing costs will run somewhere between three and five percent of the final selling price, although that figure can vary. In some cases, you can avoid the upfront expenses of closing costs by rolling your settlement fees directly into your loan. Although rolling your closing costs into your loan isn’t available for all types of loans, you should definitely talk to your lender if you’re interested in doing this.

Cost of Moving – The two major costs in terms of moving are your physical relocation expenses and new furnishing expenses. The cost of hiring a moving company to move you can vary widely, so it’s a good idea to shop around. Furnishing your new home will also be an expense you need to consider. Even if you don’t get all new furniture and appliances, you’ll probably need to spend some money on smaller household items such as curtains, rugs or other household décor.

Homeowner Expenses – Although general home expenses will be down the road a bit, it’s a good idea to starting thinking about those expenses—as well as saving up for them—now. A good rule of thumb is to budget $1,000 per year for general home expenses going forward. You may need to budget a little more for general expenses for the first year in your new home, but once you’re settled in, $1,000 should be enough.

If you haven’t made a concerted effort to build up your nest egg, now is definitely the time to get serious with your savings. By putting away a little money each month, you could be ready to move into your dream home in no time at all. ∆