• Saving money to buy a new house

• by: Avocados  |  last updated: June 09, 2008

• Category: Saving on Everything |  Tags: How to save money to buy a house, savings on home, buying a house, house payments

• You have well settled down with your job. And now thinking of finally buying a house. But something has been stopping you from going ahead with it. Because doesn't buying a house mean that you need to have a good financial backing? And what about the house loans, down payments, having a huge saving?
  
  When you want to buy your dream house, there is always the tingling fear of whether you will be able to afford one. But with a little bit of common sense, smartness and saving habits, we can buy the house of our dreams. But it does require a little bit of hard work...

• 1. Figure out how much money you need

• Calculating approximately how much money you might need is the first step towards saving. This helps you to have a goal or target in front of you. Then one needs to find out how much the loan works out to be. Lois Center-Shabazz gives a simple method to calculate this. The formula of the monthly payment of P+I+T+I, translated, this is the principle, plus interest, plus taxes, plus insurance, which, added together, equals the total monthly payment.
  
  She further goes on to say, 'Understanding the P+I+T+I for different loan amounts will enable you to better prepare for home ownership. For example, if you could afford $1400, total for a P+I+T+I monthly payment, determine what price home would fall into this price range.'

• 2. Curtailing down avoidable expenses, temporarily

• Saving money essentially means not spending the money you have for one purpose in order to use it for something else. So it would be best if a person determinedly cuts down expenses on entertainment factors like shopping, eating out, partying, vacationing or any other things we spend money mindlessly. That does not mean you should not spent on basic necessities. Nor does it mean you have to forgo of the pleasures of living. It just means to hold it for sometime. One needs to be able to be mentally prepared and strong to resist all kinds of impulsive spending.

• 3. Additional means of Income

• Get a part-time job and save the income for your home. Even if the job is every other weekend, it will help. In case of couples, if one of the spouses is staying home, s/he needs to get another job or work from home. Doing a double shift can be tiring so look for jobs that would not consume most of you time. E.g: Like maybe a part-time job at a store. Any kind of additional means of income is helpful. One can also ask their parents to help in if possible. Your family will always be ready to help you. Ask for cash as gifts: When you have a birthday, graduation, wedding or any other celebration, explain to family members in advance that you are saving for a home.

• 4. Use you Tax Returns and other monetary benefits

• Use your tax returns and any other monetary benefits that might come your way towards your house. Even if the amount is less, it can make a lot of difference.
  
  Focus all you monetary profits towards paying off your down payments. After purchasing your home, speak with an accountant. Find out how many more exemptions you can take during the year, so you can use your future excess taxes on your monthly payments.

• 5. Open an account only for the purpose of savings

• All financial experts agree on this point that one needs to open a separate savings account with the sole purpose to make regular deposits and payments for the house. This account should only be used for this use and not mixed up with your retirement fund nor emergency funds.
  
  To give you that extra push,you can make a chart to track your your progress and post it somewhere to remind yourself of your goal. This will also be a reminder and a motivational factor for you to keep up all your goals intact and to work for it.

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