Saving up for a house is not an easy task, especially when the lenders expect the borrowers to pay up to 20 percent in down payment for most housing mortgages. Thus, even for a $200,000 mortgage one may have to pay around $40,000 as the down payment. Although there are certain loan schemes which do not require the borrower to pay even a single cent of down payment, it makes financial sense when a substantial down payment is made for any type of mortgage. Therefore, for any person hoping to buy a house, looking at ‘how to budget saving up for a house’ should be of paramount importance.
Maintain the ratio between the income and the monthly mortgage payment
In the process of budgeting savings for a house purchase it is important to consider the potential income and the probable expenses in relation to buying a new house. In general, if a substantial amount of income gets absorbed for the monthly payment of the housing mortgage, it may give rise to a multiple financial problems. Thus, the budgeting should be done in a way where the purchasing of the house does not interfere with the payment of bills or other expenses in relation to maintaining the new house. Ideally, when the monthly payment for a newly purchased house is at around one-third of the monthly income, the homebuyer could manage the rest of the expenses without any major issues.
Budget the sources of funds for the down payment
In relation to paying the down payment, it is necessary for a person to look at all possible sources of obtaining the down payment funds. These sources can be the personal savings, savings in an IRA account, the 401(k) or 403(b) retirement plans etc. At the same time, it is worth checking the facilities provided by the Federal Housing Administration, State Housing Authorities and the Rural Housing Service of the US Department of Agriculture in relation to obtaining housing mortgages with a lower down payment.
Look at high yielding investment options to augment the savings
In case there is an urgent need to come up with a substantial down payment within the next couple of years, it may be worth investing in high yield savings or money market accounts, which can give a considerably higher return within a short period of time. However, investing in high-risk accounts or in the financial market, with the expectation of a higher return is not recommended for the purpose of budgeting savings to purchase a house.
Improve the credit scores and settle any outstanding credit
In some instances, or when following a substantial down payment, one may have to live on his or her credit for a short period and it is therefore important to settle any outstanding credit before committing into buying a house. This should also improve the credit score of the homebuyer and therefore should make the securing of a mortgage less hassle.
Budget the additional expenses in relation to the purchased house
Another important aspect that needs to be thought of is the additional expenses that may incur through the purchasing of a new house. The expenses may be for upgrading, furnishing, re-designing the yard or else to install a new security system. However, small these expenses might be, one needs to budget them upfront, as collectively it might cause a substantial expense to the already strained economy of the homebuyer.
Thus, when someone wants to budget saving for a house, it is important to look at the income sources, the avenues of expenditure and the ways of gaining the highest yield from the available savings. After budgeting using the above criteria, it is possible to decide on the correct time to purchase a house as well as the most affordable way of doing the same without having to suffer financially.