Saving for a down payment in a high cost area can be an expense save — especially if you have to start saving for your kid’s college fund and still find the money to put away for retirement.
According to Forbes Advisor - Mortgages, in 2023, the median home price in California is $836,110.
However, with the cost of living being extremely high, here are some tips you can use when wanting to save for a home.
If you are considering moving to an expensive state such as California, then saving for a down payment is one of the important steps you need to take.
Since the price of homes in California are so high, you would need to give at least 20% of the median average housing price as a down payment, which could take several years to build up.
If you are currently renting, you can use the money you are paying for rent to determine how much you can save for a down payment.
Using the rent amount, add in mortgage terms, homeowners insurance, private mortgage insurance, property taxes, and mortgage interest rates to calculate how much you can afford every month.
This means that your current rent must be able to support all of the above, including HOA fees, to be able to save for a down payment. However, you may be eligible for a low down payment mortgage funded by the VA, FHA, Freddie Mac or USDA.
Tips on How to Save for a House
Here are some tips you can use when wanting to save on a down payment:
● Research home prices: Researching the prices of homes in the area where you would like to stay will help you determine how much money you need to save for the total house and the down payment.
● Apply for government assistance or loan: The US Government has a wide range of home loans on offer and insurance programs that you might meet the criteria for. For example, service members, reservists, and veterans can apply for a home loan for regular purchases to help finance their purchases with zero down payment.
● Decide on the down payment amount: The smaller you make the down payment amount, the quicker you can purchase a home.
● Add in closing costs: There are extra costs that come with purchasing a home. These include appraisal costs, property taxes, insurance, home inspections, and other costs that will come with the loan or costs to the property.
● Maximize your credit score: People who have a higher credit score can get a better mortgage interest rate when wanting to buy a home. This can work in your favor when you want to finance your dream home in California. A high credit score makes you more likely to be eligible for a lower down payment plan.
Final Thoughts
Saving for a home in an expensive area such as California might seem impossible if you are unsure where to begin or where you can get assistance.
Using the above tips will help you save for a down payment and still invest in other accounts to better your future financially.