Welcome to your guide on saving money to buy a home in this video, I'm going to
walk you through, how do you save money?
How do you create a plan to actually save money instead of going into this blindly,
and also give you a tool to figure out how much money do you actually need to
pay when you do look at buying a home.
And so here's the danger of going in blind far too often.
I see people, they have this goal that they want, but the
actions that they're taking right.
Aren't in alignment with that goal.
And so what ends up happening is it's just this frustration
that actually leads nowhere.
So if you don't create a plan for saying, I know this is where I
want to go, and this is the plan to get me there, then you're never
going to end up in that place.
And so here is the magic formula.
It's not really magic, but here's the formula to figure out what your savings
needs to look like, what that plan for your savings needs to look like.
And it is right here.
We first need to know these four things before we actually create a plan,
we need to figure out what our down payment is, what our closing costs
are, what our reserves are going to be.
And then how many months until we plan on purchasing this home.
All right.
So number one, we need to figure out what our down payment is.
We can look at the minimum down payment of each type of loan.
And I have several videos on loan requirements for conventional FHA,
VA, and USDA that you can look at.
So the maximum minimum down payment is 3.5% on all these loan programs.
Then with our closing costs, I'm gonna show you a calculator to figure it out.
Reserves as what you're comfortable with having left
over after you buy a home, right?
You don't want to just buy a home and then just be drained in your bank account.
Then you won't have money to move in to furnish, to live after you move in and
you want to have some money leftover.
So how much do you want months reserves or a number of payments
left over in your bank account?
So if your monthly payment is 1000 per month, one month reserve is $1,000.
Two months of reserves is 2000.
And then the months to move in are you going to plan on moving or buying a home
within the next two years, three years, five years, six months, that's going to
help you structure how much you need to save a monthly to be able to get there.
And what this really comes down to is that intensity.
Is so much better in my opinion than automation.
So many videos about savings are always talking about you need to automate your
savings, go throw it into this other account and, take all the extra change
and go put it in a separate account.
It's that might help save a little bit of money, but we need to really lay out.
But like we need laser focus intention to actually be able to
save this large amount of money.
It's not going to happen by accident, right?
If you need $30,000 to buy a house, it will not happen by accident.
And it will not happen automatically.
In my opinion, or experience, you need intention.
You need a solid plan, to get you there.
That way you can feel like you're on track.
You're on pace with actually being able to achieve this because
automatic trickles of money are not going to get you where you are.
To go.
All right.
What you want to do is while you're saving, you want to save
this money in a money market or high yield savings account.
And the goal here is to protect it, not invest it.
I know you could go Yolo this into some sweet game stop or AMC or whatever you
want to do, but that risks the money.
Taking a downturn, even if we put it into safer investments, like even
just like a mutual fund or an index fund has the risk of going down
and we don't want you to be you.
You don't want to save all this money over a period of months.
And then when you want to pull it out, it actually has lowered in value.
So let's take a look at this closing cost calculator.
This will be down in the description.
This is going to be really good for you.
Get a solid idea of what kind of cash is going to be needed at closing.
And so this is going to give you a good closing cost estimate.
Now you really want to talk with a lender to get a fully accurate quote, because
again, this is just an estimate here, but this is one piece of the puzzle.
Like we talked about in that formula section.
So you can put in, your location, your home price, your down payment,
and then based on a mortgage amount and the type of loan that you have,
it will show you the closing costs and know actually break those down.
In detail, if you want to see those, for instance, I can see
here cash needed at settlement.
All right.
We'll include it of a down payment is $18,524.
All right. And that's a working estimate.
Again, talk with a lender to be able to get.
Good breakdown and a lender will help you explore things like seller credits.
And if that can help you lower those costs as well, but okay.
18,524 what I can do is take that and put that into my calculator.
If I know that's exactly how much I'm going to be spending
every month, let's say leftover.
I want to make sure that I have a kind of a cushion of, let's say $2,000 to
some padding in there for extra expenses.
That's my reserve budget.
What it would then be is 20,524.
So let's say what that's, what my total cost is at the top of that formula.
Now I need to divide that by how many months it's going to take me
to, until I want to buy a home.
So let's say I want to buy a home within the next two years.
So I'd take that number and divide it by 24 that's 24 months over two years.
So I need to save $855 per month to meet that target.
So within 24 months, if I saved $855 a month, I'll be right there.
And if that doesn't work for
You have you get to change these numbers and then you can figure
out what your plan looks like by changing these different variables.
So if that's too high, maybe I need to push that out maybe six more months or,
maybe 12 more months, or I need to figure out how do I lower this down payment?
How do I lower the closing cost?
How do I get credits?
Are there other ways that I can get some money in there to accelerate
that savings or shorten the time?
And consider exploring other, other special programs.
For instance, I have a video on bank of America is a down payment
and closing cost assistance program.
I'm not hearing to endorse it.
I don't have any sponsorship with them, but explore those options.
It's worth taking a look, look at the other options that you might
have available in your market.
Do some research to see, are there ways that I can change some
of these variables so that my timeline is exactly where I want it.
And maybe this is on par for you?
Yeah. You're like 855 bucks.
Great.
I can do that.
No problem.
And if so, that's fantastic.
And there you got there as your plan.
I know that budgeting is the last thing that you want to hear, because I'm
sure if you're looking at saving money, so many people are talking about like
budgeting, but it is wildly important.
And what I mean by budgeting is not expense tracking, too
many like budgeting apps.
Just tell you how much you spend each month and that didn't really
create any actionable insight into what's happening with your budget.
You actually need to be able to understand, like before you make the
purchase, can I make this purchase?
That's what zero-based budgeting is. Zero-based budgeting
It's actually budgeting money in your bank account rather than anything.
Right because income is actually a future metric.
It's something that hasn't really come to us yet.
We need to only budget the money that we have directly in our
position that we can handle.
And so what you do with zero-based budgeting is every dollar that you get,
you assign it, a job, you sign it a task.
And so if I do that, I can set aside things for, I have this much allocated for
groceries, this much allocated for heating out this much allocated for saving for a
home, this much allocated for retirement.
And so when I go to eat out, I can look into my budget and see,
I only have this much money.
To eat out.
Then I can make a better informed decision on if I can actually purchase this or not.
Otherwise you look at your bank account and it's one number, either big or small,
and you're like, ah, I can afford this.
But all that money you don't realize as being as actually should be
saved for another job in the future.
An app called you need to budget.
It's really great.
And every dollar is great as well.
I personally use you need a budget.
I think it's fantastic.
And it's a wonderful zero-based budgeting option and budgeting is important.
No matter if your income is on the lower end or on the higher end,
if it's on the lower end, you're likely tracking these day by day
expenses on these little things.
Add up into big things.
If you have a higher income, you still need a budget to be able to track some
of the bigger moves that you're doing.
Maybe you're not so concerned about how much you spend on a coffee in
the morning and that's okay, but you still should be really concerned about
where's your money going for retirement?
Do you have money for this down payment?
Do you have money for repairs cost?
If you can.
Okay.
So there is no way around doing this.
There is no magic trick to this.
I wish there was.
But it really is going to come down to these three things.
Get your monthly savings, target, increase your income and or lower your expenses.
There is no way around these things, right?
Find out your monthly savings target.
If you're not happy with it, increase your income, lower your expense.
Those are the only options.
Okay.
There is no magic trick or solution to this increasing your income.
Finding other jobs, finding a higher paying job, getting a second job selling
things like there's all these different ways that you can increase your income.
And it's perfectly within your power to be able to do that.
Lowering your expenses.
This is also gonna be inclusive of finding other programs on ways you can
lower the down payment, lower closing costs by getting seller credits,
figuring out other cheaper lenders.
You can work with it.
What are these options that you have to be able to lower these expense?
If you need to.
So here's some things to consider that may not apply to you
specifically, but they may as well.
If you pay up high interest, it could that help you save more.
Monthly.
There are a lot of people that have high interest credit card debt.
And often the monthly payment that you're paying on it is pretty high
considering what the balance is.
You might have a $5,000 balance, but the payment might end up
being a few hundred dollars.
And so what would happen if you paid down that first?
Now you can accelerate your savings a lot quicker with that $200 per month.
Could you downsize temporary other, could you lower your.
Could you trade in your car, sell your car for maybe something
that maybe has a lower payment.
Could you downsize your lifestyle a little bit?
I think the answer for quite a few people is, yeah, there's a lot of
things that we could do to downsize.
If you have the option, is it possible to live with somebody?
I'm a single guy, so I can go live with friends.
If I ever need to downsize and save some money.
Is that an option for you?
Like in a lot of metropolitan area
It's very common to have roommates, even as adults.
I know it's not the dream and it's not ideal, but what are you doing?
Are your actions aligning with your goals in the future?
And if they're not.
Then we can only complain for a certain period of time until we
start to get ah, we need to start aligning our actions with what I
really want to happen in the future.
And for some people they have the luxury and the privilege to be able to say this
is a lot easier then for other people.
I totally get that.
But we also, we all.
Have to deal with what we've been handed and say, what can we do to make sure
that we have this goal that we want in the future, what can we do with our
actions what's available in front of us?
What can we do?
What can we learn?
What can we actually put into place to get to where we want to go?
And sometimes that's going to include maybe doing some things that aren't
the most ideal for a temporary period of time, until we can build
up to the place that we want to go.
Can you extend your commute and find a cheaper location?
A lot of, for a lot of people, you can extend your commute by maybe even 15
minutes and be in a much cheaper location, which is going to lower your down payment,
lower your closing costs and all of that to shorten that timeline for you.
If you want it that way, you don't have to live downtown.
You don't have to live in these high expense areas.
You can extend your commute.
And I know there's some places that still, you have to be far away and
these outliers are not the rule.
Okay.
For most people in the US
You can extend your commute and find cheaper places to live.
Can you get another job, whether it's temporary, higher paying
primary job or a secondary job?
Shoot, you're watching videos on real estate right now.
Have you considered looking into working in real estate
I know plenty of people who within their first two years of working in real
estate make a hundred thousand dollars a year, or there plenty of people
who do real estate as a side job.
And they sell a home every few months and make a few thousand dollars doing that.
This is an option, do things that are within your skill set.
You're already learning some about real estate.
It's an option to explore, to figure out how you can get some
more money for a house in the future.
And then also consider how are you spending money from things like bonuses,
gifts, any items, large ticket items that you sell, or your tax return,
where are you putting this money into?
And if you get that things like that in the future, could you be allocating that
more towards the goal that you have.
For the future, I know too many people who take, just take their tax return
and they think it's like free cash to go was spend on whatever they want.
I'm like, that's your money?
That's yours.
Like you can go be a little bit smarter with it.
Then you know, if you don't have the money for a vacation, just
cause you get some money that can.
It doesn't mean you necessarily should probably go on the
really expensive vacation.
Maybe we put some of that into some savings or working towards a longer
term goal that you might have.
And then finally consider shifting some things with your mindset.
Like your actions have to match your goals.
If you say that you want this.
Don't just back it up with thought and with telling people about it back it up
with actually doing the action and actions usually are not super enjoyable to do.
They're going to take some work and some energy to be able to get there,
slow your timeline, way down as well.
Don't feel like you have to go purchase this awesome home.
You have this idea of purchasing a home and your mind immediately
wants to be like, great.
I want to go buy a house now
if you can.
Then, that's perfectly fine, but if you can't that's okay too.
Just slow it down.
Don't put so much pressure on yourself and having no plan creates tension
and stress for a lot of people, they say, I want to buy a home,
but then they don't have a plan and they assume they have to buy it now.
And all of a sudden they're in this stress and this frustration
and everything is against me.
If you're in that spot, you're saying, I can't buy a house now.
Okay.
That's fine.
What's the plan then?
What are we actually going to do?
What are we going to put into place?
What are the numbers here?
Let's figure that stuff out now so that everything falls a little bit more
into line as you're working towards it.
And then also this one's huge.
Don't play the game of keeping up with high expense areas because I know
guarantee always happens in the comments I'm going to be well, this doesn't
apply to this place in California.
This doesn't apply to whatever.
Don't live there.
I know that some people want to live in these areas.
That's great.
But if you can't afford it, you can't afford it.
I'm sorry.
I don't know what to tell you.
Like I get it.
I want to live in cool places.
But I don't, I live in a cheap, like a lower cost of living area.
And now I have money to be able to go travel to wherever I want to.
And you might have a job there.
You might have family there.
These things all can change.
I know it's not, it might not be within things that you want to happen, but you
can live in a lower cost of living area.
A lot of the U S has areas that are low cost of living.
And guess what I'm doing.
Okay.
I'm living in Dayton, Ohio, and I'm having a pretty good time here.
Okay.
Like you'll be okay.
Not living in a high cost of living area, if you can't afford it.
All right.
If prices are just skyrocketing faster than you can keep up with savings or
you're already like, there's no way I'll
be able to ever afford that.
Then we need to come in line with what our goal is, what we actually want to happen.
If I do want to purchase a home, then either need to figure out
how do I increase my income to be able to purchase it in this area?
Or how do I lower the cost or somewhere else that I can live, that I can still
thrive and have an enjoyable life.
And my family can live well without me feeling this friction
all the time of this area growing too fast for me to keep up with.
Alright. And finally
You don't have to have a cute Instagram home, a home, your first home, especially
does not have to be this super cute thing that you get to post pictures on line.
All right.
And I know that's a lot of the pressure that we see as we
see other people buying homes.
It's oh my gosh, they have such a cool home.
How did they get this as unfair?
I get it.
Cause I'm at the age where so many of my friends are, they're getting
married, having kids buying homes, and I'm sitting over here, like.
All right.
This is of internal work that you're doing, it does not have
to be this super cute thing.
That is the dream home right upfront.
It can be a stepping stone.
They be, this is the house that I got, so it can build up some equity.
I do some, light renovation to it.
And then over a period of time, then it grows some equity.
I can then use it to buy a home that I do want in the future.
We don't have to all get it now in the very beginning.
Okay.
It's perfectly okay.
To slow down, get a plan in place.
That's going to help you understand what to do on these next steps.
So you don't feel overwhelmed and stressed when you're looking to save money to buy a home.