How much money do I need to save to buy a house?
Let's start with the down payment. The down payment is the portion of the total house price you can pay upfront. Before the housing market crash of 2008, a homeowner could put nothing down or a very little amount of money down. However, this is what led to the housing market crash.
As a loan borrower in today's market, you must put down a certain percentage. The general rule of thumb to receive the best interest rate on the mortgage loan is save for a down payment of 20 percent of the total house cost. For example, if you are looking for houses around $400,000, you will need to put down 20 percent of that cost or $80,000. This is a massive amount of money to save, so how do you go about saving it?
If you can live at a parent's house for a couple of years, many young people do this to save for either their first house or first condo or co-operative. Or if this is not possible, think about living with roommates or moving to a smaller apartment to save money. Also, many ambitious home owners get a second job for a few years to save for the extra money toward the down payment.
Remember that you will only be approved for two and a half to three times your salary for a mortgage loan. Thus, if you make $45,000 a year, you will be approved by the bank or a lending provider for up to $135,000 total. With a $45,000 annual salary, the bank will not approve you for a $400,000 home. So keep your house buying price realistic and that will keep the down payment realistic.
Both the 20 percent down payment figure and the mortgage loan approval rate are nationwide standards. However, to keep saving, it depends on the state you live in.