Aspiring homeowners know that without a good financial plan, it is nearly impossible to purchase a house. Unfortunately, the rising costs of buying a house have put a damper on hopes for many. During the last year of 2020, the median home sale price rose almost 13%, leaving many feeling deflated and scared that saving money to buy a house was a lost cause.
However, recent data suggests that this isn’t necessarily the case. According to a report released by the Federal Reserve, home values actually fell by 6.7% at the end of 2020—the same time that mortgage interest rates hit historic lows. This led to the average consumer’s dollar going twice as far when it came to buying a house in December 2020 as opposed to the previous year.
It’s important to note, however, that the trend of home prices being more affordable is not likely to last. Depending on where you live, the cost of a home could very well be back to its pre-2020 level or higher. That means it’s now more important than ever to save money properly to purchase a home.
When saving money to buy a house, it’s important to develop a comprehensive budget and adhere to it. Think of your budget as a roadmap to getting the house of your dreams. Carefully assess your income and expenses, then adjust them as needed to free up money. Additionally, since interest rates are favorable, and with the expected rise of home prices, it is wise to lock in a mortgage rate as soon as possible.
Another way to save money in preparation for buying a house is to dramatically reduce your living costs. Find ways to reduce your overall monthly expenses by evaluating your rent or mortgage, childcare needs, utility bills, and more. Other steps to consider include cutting out unnecessary expenditures, such as going out to eat, taking vacations, or buying clothes and electronics.
You may also want to consider using a financial advisor or enrolling in an online course that can teach you how to budget and save smarter. This can help you create a realistic plan to purchase a house without depleting all of your savings.
Although the price of buying a house may have gone up during 2020, it is still possible to achieve your home-buying goals–with the right strategy. As long as you budget effectively, lock in a mortgage rate, and reduce unnecessary expenses, your dollar could still go twice as far as it did at the end of 2020.