Purchasing a home is one of the most exciting times of a person’s life: it represents freedom and the ability to organize your life as you choose. It’s no wonder that the majority of Americans consider buying a home to be one of their biggest financial goals and a source of stability for the future, particularly in the hot market of Arizona, where sunny climes and wide-open skies draw thousands of new residents per year.
Most home buyers are aware of the need for a down payment, but they may not be aware of another essential upfront expenditure for a new home: closing costs. These are the fees involved in legitimizing the purchase, from researching the home’s title to paying lawyers and other professionals for their time in preparing documents.
Closing costs can be anywhere from 2% to 5% of the overall loan cost; this may seem small, but when you consider that the average home price in Arizona is about $350,000, that’s a sizable amount indeed. For an average home, you may need as much as $17,500 on hand for these expenses.
Today, we’ll provide some actionable advice on how to save up for closing costs so that you can settle into your Arizona dream home sooner than you ever expected.
Start Planning Before You’re Approved
The sooner you begin saving for closing costs and down payment, the better. Before you even consider looking at houses, make sure that you have a plan to pay these expenses.
You might find it helpful to work with a financial planner who can help you identify how much you can afford each month for a mortgage, as knowing how much house you’re likely to buy will help you prepare for that 2% to 5% expense upfront.
Tabulate Your Expected Closing Costs
To better understand how much you’ll actually need to pay, you need to have a clear picture of what closing costs are, including all the components. Some of these are fixed fees, while others are percentages of the overall home price. Create a spreadsheet with each of the different components, including their expected costs, to identify your target savings goal.
It’s always good to overestimate things such as these rather than find yourself short on cash when you close on the home, so expect to pay the full 5%; you can always use the money you saved to pay ahead on your mortgage.
Open a High-Yield Savings Account Just for This Purpose
Have a separate savings account that’s just for your closing costs and other initial house expenses rather than simply including it in your typical emergency savings account. This can help you better identify how much you need and know that you won’t be dipping into funds you may need for other expenses, like car repairs or medical bills.
Break the Savings Goal Down
It’s very easy to get overwhelmed by large numbers and feel that it’s utterly insurmountable, but chunking up the amount you need to put toward this by paycheck or by month can help you feel more in control of the process.
Identify how long it will be until you want to purchase a home: let’s say six months. Getting paid every two weeks gives you 12 paychecks to save up for the closing costs. Assuming you pay $17,500 for an average home, you will need to put away about $1,460 each paycheck. This smaller number can feel much more manageable and keep you motivated.
Look for Additional Earning Opportunities
If $1,500 or more seems like a very tight squeeze on your monthly budget, it may be time to get a side hustle that you can put directly toward your home purchase. Numerous gig opportunities are available that don’t require a lot of effort or time investment but make a modest amount of money that can go to your savings. For example, you may choose to freelance in your specialty, set up an e-commerce site, write a course to sell, or even drive for a ridesharing service. The key is funneling that money into your savings account and not changing your monthly expenditures to accommodate the new funds.
It can be hard to stay focused on your finances when you have so many other things going on, but staying committed to growing your money can make an enormous difference in whether you can afford a home.
Give yourself breathing room from time to time, remembering that you’re in it for the long haul and have a clear goal. You might find it helpful to use a money management app that lets you see the rise in your savings over several months, as it can be incredibly encouraging to watch the sum grow.
Another way to stay focused on your money goals is to journal about your future in a home or set up a vision board with a picture of a house similar to one that you’d like to purchase. Rather than seeing closing costs as a drain on your finances, envision that savings account as a stepping stone to the future you want to have. This can make it much easier to say no to smaller purchases that would eat into your home savings because you know that the overarching purpose of your finances is so much more important.
Keeping careful track of your money, setting monthly goals, and staying focused can help you achieve your sunshine dreams in beautiful Arizona, putting all that hard-earned money down on the table for closing costs.
As the desert sun sets over saguaro-studded horizons, you can almost see your future home materializing on the landscape. The glass windows blaze orange with the sunset’s glow, and you picture your family gathered around the kitchen table, planning projects for the big backyard. The sound of children’s laughter echoes down the hallways leading to their bedrooms. This dream home represents everything you’ve worked for – all those small sacrifices add up to the stability and joy you’ve always wanted. When you hold the keys in your hand and step over the threshold for the first time, you’ll know every penny pinched was worth it. The closing costs were just one more milestone checked off on the road to your forever home. Now the real adventure begins.
John Davis is a passionate content writer with a knack for crafting engaging narratives across various subjects. With a keen eye for detail and a love for storytelling, John brings ideas to life through the power of words. His dedication to delivering high-quality and informative content has made him a trusted voice in the digital realm. When he’s not at his desk, you’ll find John exploring new hobbies and seeking inspiration in the world around him.