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How to save for a down payment on your dream home

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Finding and owning a dream home is everyone’s fantasy. Since dreams are personal and subjective, there is no right or wrong when it comes to the house that you want. It can be a 6-bedroom luxury house or a smaller single-family home with all the amenities you need.

Regardless of your preferences, there are plenty of San Francisco homes for sale to choose from. However, you will still need to hurdle certain requirements. Since you’re unlikely to pay in cash, you need to prepare for a down payment.

Saving up for your dream home is no joke. However, you can overcome the challenge by learning how to better manage your finances. Continue reading below for some valuable tips that will help you save up for your dream home faster.

Set a clear goal

Whether it is luxury houses or condos in San Francisco you’re eyeing, you need to set a clear and specific savings goal. The first step is to determine how much money you exactly need. Begin by establishing how much you should spend on a house. Ideally, you do not want to exceed the 25% threshold of your monthly net salary.

Of course, the amount will differ for every person. Also, key factors will affect this number. These include your salary, your spending habits, your budgeting skills, and your lifestyle.
Next, you want to save at least a 20% down payment for the house. This amount will be enough to keep you from paying for the private mortgage insurance (PMI), which protects lenders in case borrowers start missing their mortgage payments.

If 20% is too steep, do your best not to go below 10%. If you go below that number, you will dig yourself into a debt hole, doing nothing but paying the interest and other fees for a very long time.

You also need to set a goal for completing the 20% down payment. Two years is a good target for rounding out the lump sum. Additionally, make sure that all your goals are realistic.

Practice the 10% rule

Another important tip that will help in buying a condo in the Bay Area or a townhouse within the city is the 10% rule. This means saving a tenth of what you’re making every month. Follow the saying that you need to “pay yourself first before anyone else.” In this case, pay yourself by saving 10% of your monthly salary.

The key is to begin saving as early as you can. Also, you want to assign a separate account for your down payment. Create a new one apart from your paycheck account. This way, it will not be easy for you to touch the money.

Streamline your spending

One of the keys to saving up money faster is to streamline your spending. Revisit the items that you regularly pay for every month. It can be a gym membership, a budget for your sneakers collection, or a cable subscription. From there, identify the ones that you can give up at least for the next two years.

If you’re already saving up for your retirement, consider halting it for the next two years. Realign your retirement savings with your down payment fund. If you’re placing $500 a month on a 401(k) or IRA, save the money for your down payment instead. By the end of two years, you will have an extra $12,000 that can help complete your down payment.

Look for a part-time job

If you have a lot of time to spare, especially during weekends, consider looking for a part-time job. You can make a few hundreds of dollars more by taking part-time jobs during your free time. Your goal is to boost your income as you work your way to completing your down payment.

Settle your debts

Last but not least, you need to settle your debts, especially the ones involving your credit cards. The same thing goes if you have student loans or car loans to settle. These debts can be the biggest hindrances to saving up efficiently.

Let us guide you in your house-hunting

Learning how to save for a down payment is the first step in your journey toward owning your dream home. By saving up for a down payment, you will have a clearer vision of your housing goals. When it comes to home hunting, you need to consider some professional guidance along the way.

Let Team Hatvany find you the best homes and Bay Area condos for sale in key cities. Their extensive knowledge of the local real estate scene will help you make the best decision. Get in touch with them at 415.710.6462 or shoot them an email at team(at)teamhatvany(dotted)com.

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