Owning a home is a significant achievement if you have set aside enough money to do so. But how much is enough money for a new home? The answers can vary with every person. However, one thing is sure - saving money is an essential part of having a new home. While there are many ways to finance the acquisition of a new home, getting money from your pocket and piggy bank plays a key role in achieving your goal of having a new home.
Here, we’ll share interesting ideas to consider when saving up for a new home.
Decide on What Type of House You Want
Your budget and savings will depend on a definite reference, which is the kind of house you are trying to buy or build. You first need to determine the dimensions of the house and lot if you’re planning on buying a house. If you want to build your house, you need to consider several factors such as miscellaneous costs, cost of construction materials, and the cost of hiring a building contractor, sub-contractor, and architect. A good recommendation if you are choosing the construction option is to go for kit homes as this option gives you the best sense of freedom in managing your savings and budget. As the name suggests, you are using prefabricated materials and parts that can be easily assembled on your own or with minimal help from a home builder. Prefab materials not only cost cheaper, but you are also assured of quality due to the strict quality guidelines of the factory producing the parts.
Set Your Savings Target
Once you have decided on either a house purchase or construction, you can then set your target savings by determining every possible cost associated with your choice. Generally, both home purchase and construction include upfront and ongoing costs. Depending on your source of income and your expenses, you can estimate your average savings by subtracting your net income with your total expenses. The remaining amount can be entirely appropriated for your housing project target or you can set aside a minimal part for miscellaneous expenditures that may arise. Your target may be the partial or full coverage of all the purchase or construction costs, which also depend on another factor that we’ll discuss next.
Set a Timeline for Your Savings
A significant part of how much you can save will depend on the amount of time you will designate for saving. This is the reason why young professionals and even college students are encouraged to start saving as early as possible to sufficiently cover any important or major spending that may come in their lives, such as buying a house, a car, or starting a business. If you want to cover the entire cost of purchasing or building a house, you’ll need a longer timeline to accumulate enough money to do so. If you wish to cover a significant part of the costs and supplement the rest with a mortgage loan or house financing, your timeline can be short and manageable. The home building option may be the costlier and more time-consuming option of the two, but choosing a kit home can significantly cut the costs and construction time. Choosing functionality and cost-efficiency can still make you achieve a successful house purchase or construction.
Your creative and critical thinking can get to work and spawn great ideas when it comes to saving for a major project such as building or buying a new house. Thinking outside the box can do wonders when you reach a stalemate in your savings options. The most important thing to keep in mind is to keep your ideas and decisions for saving rooted in reality. A realistically planned and executed savings can help you to effectively achieve your desired goal: your new home.