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Practical Ways To Save Money To Buy A Washington DC Home

Practical Ways To Save Money To Buy A Washington DC Home

In 2020 the median home price in Washington, DC crossed the line to a million dollars. And even then inventory was in short supply. If you were priced out of buying a home in Washington, DC a couple of years ago you should know that the market is shifting again. Home prices should start to come down now that interest rates have edged up, and that could mean that buying a home in Washington, DC is in your future.

But before you can get that mortgage pre-approval and start looking at houses in the DC area you need to save for the costs associated with buying a home.

Home Buying Costs

You already know that you should have a down payment for a new home. While some mortgages don’t require them it’s a good idea to put down as much as you can afford as a down payment. It used to be that 20% of the home’s cost was standard for a down payment. That’s a great number to shoot for, but realistically you can buy a new home with a down payment of 10% or less, depending on your lender.

In addition to the down payment you will need to have funds available for closing costs. Closing costs are paid at the closing when you actually get the keys to the home. Closing costs are a collection of fees for things like:

  • Lender fees
  • Prorated property taxes, homeowners insurance and homeowners association fees.
  • Home inspection.
  • Appraisal.
  • Real estate attorney fees.
  • Transfer tax.
  • Title search and insurance fees.
  • Discount points.

Typically you should about 5% of the cost of the home saved for closing costs and miscellaneous expenses. You should also have money saved up for things like the cost of getting out of your current home or breaking a lease on an apartment, moving costs, and deposits for utilities.

The more money you have saved for buying a home the better off you will be. No matter how carefully you plan your purchase you can expect that there will be unforeseen costs and expenses during the buying process. So, while you should be paying down as much of your debt as possible to get your debt to income ratio in great shape you also need to be saving money for the expenses associated with buying a home.

Many people who are living paycheck to paycheck or not far from paycheck to paycheck get frustrated because they don’t know what they can do to try and save money for all these costs.  There are actually a lot of things that you can do to start saving. And now is the time to start so that you are ready to start looking at houses in Washington DC when home prices start to drop.

How To Save Money To Buy A House in Washington DC

If buying a home in DC is really your priority you can save a lot of money pretty quickly by making sacrifices in other areas. Sometimes it’s hard to make sacrifices when you’ve become accustomed to living a certain way. But in the end those sacrifices will be worth it when you’re shopping for your dream home near Washington DC attractions, Washington DC shopping malls, and Washington DC universities. Practical ways to start saving to buy a home in Washington, DC are:

Set Up An Automatic Deduction

One of the best ways to save money quickly is to set up an automatic deduction from your paycheck and your partner’s paycheck. Set up a new savings account just for home buying. Have a set percentage of your paycheck automatically withdrawn to that account every pay cycle. Your partner should do the same.

The truth is that you will adjust your spending to whatever the amount of money is in your paycheck. If you have 5% or 10% of your check taken out right off the top and deposited in the house savings account there’s a very strong chance you won’t even notice that the money you are receiving is less than before.

You may need to skip the mall shopping for a bit or cut back on those breakfast stops for coffee and a donut but it won’t make a significant impact on your day to day life. It will make a significant impact on your bank account. You’ll notice your savings growing by leaps and bounds.

Find A Side Hustle

Working at home in your free time can be a great side hustle.

There’s no shortage of side hustle options available these days. Finding a side hustle that you can do on  your own time can result in a lot of extra cash each month that can go directly into your home buying savings account.

You can shop for people’s groceries, do food deliveries, or work for a ride share company as a side hustle. You also can work from home doing customer service, copywriting, or turning your favorite craft into a product you can sell online.

Babysitting, dog walking, washing cars, cleaning homes, or other services can also be turned into side hustles that pay pretty well.

Cut Your Expenses

There are two ways to save money: make more money or cut your spending. If you do both you will be able to save a shocking amount of money pretty quickly. To cut your household expenses you can do things like:

  • Cut cable and switch to streaming entertainment only
  • Cut back to one streaming service instead of several
  • Eat meals made at home instead of eating out
  • Don’t buy coffee every day
  • Use coupons and store deals to save money on groceries
  • Cook from scratch
  • Drop to a lower tier of cell phone service
  • Use less electricity
  • Consolidate credit card debt
  • Shop at discount grocery stores
  • Buy in bulk

You don’t need to drastically change your lifestyle in order to cut expenses. Making a few cuts in areas that you probably won’t even notice, like keeping one streaming service instead of four or five or eating out only twice a week, will result in a pretty big savings.

Sell What You Don’t Need

You can kill two birds with one stone and downsize your current home while also putting money into your moving fund by selling the things you don’t want anymore. Clothes, toys, sports equipment, baby items, furniture, books, DVDs, CDs, and old electronics are all things that you don’t want to have cluttering up your new space. Even selling them at a discount you’ll be able to put money away and moving will be a lot easier when you’re not dragging a bunch of stuff you don’t even use or want to the new home.

Saving Money For A New Home Is Worth The Struggle

No one likes change, but keep your eyes on your goal of owning a home in Washington DC and you’ll find that sacrificing and scrimping for a few months to save up money for the costs of a new home is worth it. When you get that pre-approval letter for a mortgage and you are ready to call a Washington DC realtor and start looking for your dream home you won’t remember the difficulties of selling your designer handbags or shopping a discount grocery store. If you’re ready to start shopping for your Washington DC home contact us today! We can’t wait to help you find the perfect home.

Buying your dream home in Washington DC is closer than you think.

Sources:

https://smartasset.com/mortgage/the-true-cost-of-living-in-washington-dc

https://markets.businessinsider.com/news/stocks/housing-market-recession-crash-home-prices-inflation-federal-reserve-pantheon-2022-9

https://www.washingtonpost.com/business/2020/12/02/report-median-sales-price-houses-dc-now-exceeds-1-million/

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