Planning to buy a home in 2025? With only a few days left til the new year, it may seem like an extremely distant and daunting goal. But the good news is that you still have the whole year ahead of you, which means you can take it step by step. Getting started today is already a huge feat, so here's a comprehensive guide that you can use to navigate through this journey toward your homeownership dreams.
Start saving with a plan.
Building up your savings is a fundamental part of your home-buying journey. Whether you're purchasing next year or in the next few years, you'll need funds for things like down payment, closing costs, maintenance costs, and even moving expenses. Once you're done evaluating your finances, create a plan to save up for what you need. Here are some things you can do:
• Create a dedicated savings account and automate savings. Having a separate savings account can help you stay organized and focused. You can track your progress and won't be tempted to use your funds for other expenses. Consider setting up a high-yield savings account or a money market account to earn interest on your savings.
• Set a down payment goal. Before you can take out a mortgage, you'll have to put down some of the cost upfront since a bank won't loan you the full purchase price. This is why the down payment is often the biggest hurdle for many first-time home buyers. Your down will be a percentage of the total purchase price, and it's typically paid in cash at the closing of the transaction. There are multiple factors to consider when deciding how much to save for a down payment, such as your price range for the home and the programs you qualify for.
• Consider ways to increase your income. You might want to look for opportunities to make more money that you can put directly into your house fund. It could be asking for a raise at your company, moving into a new role with a better income, or picking up part-time jobs, freelance opportunities, consulting jobs, or side gigs that align with your skills and interests. And if you happen to have some tax refund or bonus at work, use the money to boost your savings and reach your goals faster. Saving up for a house can be pretty intimidating, but it doesn't mean sacrificing everything fun in your life. With a combination of strategy, discipline, and smart financial planning, it isn't impossible to reach your savings goal that will help achieve your homeownership dreams.
Create a realistic home budget
Homeownership comes with a lot of expected and unexpected expenses that many first-time home buyers may not fully anticipate. When setting a realistic monthly budget for a home, here are some things to include:
Before the home purchase:
• Down payment
• Closing fees and other legal costs. Which typically range from 2-5% of the property's purchase price. Closing costs usually include attorney fees, title fees, and inspection and appraisal fees.
After the home purchase:
• Monthly mortgage payments, which are recommended to keep at or below 25% of your after-tax income to stay on solid financial ground.
• Home Insurance
• Property taxes
• Homeowners association fees. if applicable
• Utilities
• Regular maintenance, such as lawn/yard care and seasonal upkeep
• Unexpected repairs, such as broken appliances, damaged windows, etc.
