Whether you’re considering a house, condo, or even a tiny home, there are 3 major factors
to consider when buying a home: how much your house is going to cost, your timeline, and
the money you need to buy that house.
As an example, let’s imagine you want to buy a house that’s $250,000.
You will need anywhere from 3 to 100% of the cost of the home available in cash to purchase
This is referred to as your down payment.
In decades past, you often needed a 20% down payment, but that’s not the case anymore.
It’s great if you can put 20% down, but it is a mythological requirement.
For most people, saving 20% might not be the best idea since it can imply that you rent
for longer which costs a ton of money.
On the other hand, having too little cash can be just as problematic since you may not
get the best mortgage options or terms.
To strike a healthy balance, our goal is for you to get to 10% of your purchase price.
This is a solid place between having too little cash and saving for too long that will allow
you to build a healthy down payment amount to buy a home.
So in our example, 10% of the $250,000 price is $25,000.
This may seem like a lot of money, but this is how you can get there.
Think about your timeline.
Let’s say you want to buy your home in 2 years, which is 24 months, you will need to
save a little over $1,000 a month.
If you and a partner are saving together, you would each need to save $500 month if
you’re splitting the savings goal evenly or you can split it up according to your ability
which might be 70/30, 40/60, or some other proportion that works for you.
Estimate the cost of your new home, figure out your timeline, and determine the amount
you’ll need to set aside in a separate savings account, so that you can build up your down
payment to get to your new home.