How to Raise Money for Your Dream House in Record Time

Everyone wants to live in their dream house. However, not everyone can afford the costs associated with buying a house, or having one built from the ground up. If you are on a quest to purchase your dream home, what can you do to raise the money in record time? That’s what we will find more about here.

How Much Does a New Home Cost?

Before dishing out tips on how you can raise money for your dream house in record time, let us first take a look at how much you actually need to buy one.

According to Business Insider, the cost of buying an average home in the US varies wildly. Here’s a quick look at how much the average home prices and monthly mortgage payments are:

  • Chicago
    Average home price = $187,100
    Monthly mortgage payment = $755.74
  • Phoenix
    Average home price = $192,700
    Monthly mortgage payment = $765.61
  • Minneapolis
    Average home price = $197,100
    Monthly mortgage payment = $788.67
  • Philadelphia
    Average home price = $214,300
    Monthly mortgage payment = $859.52
  • Baltimore
    Average home price = $241,700
    Monthly mortgage payment = $960.29
  • Sacramento
    Average home price = $250,360
    Monthly mortgage payment = $999.42
  • Miami
    Average home price = $254,900
    Monthly mortgage payment = $1,024.77
  • Portland
    Average home price = $267,500
    Monthly mortgage payment = $1,070.36
  • Denver
    Average home price = $279,300
    Monthly mortgage payment = $1,122.86
  • Seattle
    Average home price = $344,400
    Monthly mortgage payment = $1,379.70
  • Washington, D.C.
    Average home price = $368,000
    Monthly mortgage payment = $1,465.56
  • Boston
    Average home price = $371,300
    Monthly mortgage payment = $1,485.71
  • New York City
    Average home price = $386,300
    Monthly mortgage payment = $1,543.90
  • Los Angeles
    Average home price = $423,900
    Monthly mortgage payment = $1,682.69
  • San Diego
    Average home price = $476,790
    Monthly mortgage payment = $1,903.31
  • San Francisco
    Average home price = $628,410
    Monthly mortgage payment = $2,695.23

According to Census.gov, the median price of buying a home in the US for 2010 is $221,800 while the average price is $272,900.

Ways to Quickly Raise Money for Your Dream Home

If you want to buy a house in San Francisco where the average home price is $628,410, you’d have to earn at least $115,510. If your salary is equally average, how can you afford to buy a new home?

To get you started, here are a few ways that you can raise money for your dream house in record time, and what else you need to know before purchasing a home:

Strengthen your credit score before buying a house

According to real estate experts, if your credit score is below 660 or 680, you are going to have to pay sizable fees or a higher down payment when buying a house. If you’re still in the process of house hunting, you still have time to strengthen your credit score.

For credit scores at the 580 range, you can be a qualified borrower but in order to get a reasonable down payment and lower interest rates, the 640 to 660 score applies. Those who have glowing credit scores – anywhere from 700 to 720 or 750 will give you the best rates in the market.

What you can do to improve your credit rating is to review your credit report. Make sure that there are no errors and you are not still being penalized for old debts, much more for ones that you already paid or settled. One year before you apply for financing, stop applying for new credit so that you can give your credit score a boost.

Learn about the realistic debt-to-income ratio

Next, figure out what you can actually afford. How much income is coming into the household and how much are you paying for debts and the regular monthly expenses? From this, you can figure out how much you can afford to pay for down payment and the monthly mortgage.

It also helps if you will learn about the realistic debt-to-income ratio. A good rule of thumb to follow is that for conventional loans, your home expenses should not exceed 28% of your gross monthly income. First time home buyers can use online calculators to have an idea about how much you need to buy a house with a specific amount, and how much you need to set aside for the monthly mortgage payments.

Save money for down payment and closing costs

Perhaps the most important thing that you need to save up for when buying a house is the down payment. Depending on your credit score and the type of financing that you will get for the house, you’ll require an average of 3% to 20% of the home’s price.

Of course, the bigger your down payment is, the lower your monthly mortgage – so it pays to really save up for it. The only exception is Veterans Affairs loans, which require no down payments.

Aside from the down payment, you should also save up for closing costs and loan fees. Based on where you live, the average amount for closing costs range from $2,300 to $4,000. If it’s a buyer’s market, you can negotiate to have the seller pay a portion of the closing costs.

Establish a healthy savings account

If you think that a lender will only look at your financial ability to pay off the down payment and closing costs when you’re applying for a home loan, think again. They need to know that you will not be living on a paycheck-to-paycheck basis once you start paying monthly mortgage fees, so it pays to bulk up your savings.

You can also use the money to cover maintenance expenses and repair costs which are unavoidable once you purchase a new home. On average, you will need 2.5% to 3% of your home’s value annually to repair, upkeep and maintain it – so aim to save accordingly per month.

Earn and save more, spend less

Again, it will take quite some time for you to prepare for the actual buying of the house – so save as much money as you can. Consider taking on additional projects at work, part-time jobs, giving up luxuries in the meantime and spending a lot, lot less than what you’re used to.

Think of ways to cut back on your luxury expenses or even household maintenance budget and put the saved money towards your house buying funds. Whatever extra amount you earn, add it to your savings account or put it directly towards your fund for the house down payment.

Get pre-approved for a mortgage

As compared to the pre-approval process a few years ago, the steps are a lot more extensive today. It is important for you to prepare documentation around your income and assets.

If you yourself do not know how much you can afford, how can you expect your loan to be approved? Another thing to add to this is that you should make sure to get a house that you really like.

Buying and selling a house to relocate can be a quite expensive process – so make sure that you like the house enough to stay in it for a few years before making the decision to buy.

Consider using your equity for a down payment

Tapping into your primary home is the best way to raise money for your dream house in record time. For those who are planning to retire in a vacation home in the next few years, you can minimize your payments by taking advantage of an interest-only second mortgage.

Then, once your primary home is sold, you can exclude a significant amount in capital gains for taxes. You can use the proceeds to pay off or reduce the mortgage on the second home.

Be open to downgrading, then simply improve the house later on

If your mind is really set on buying a two-story house, you still should not discount the possibility of buying a cheaper bungalow. You can practically turn anything into your dream home through improvements, renovations and remodelling. You can work on all of these later on – but you need to purchase an actual house first.

Never take on a financial commitment that is bigger than what you can actually afford, otherwise you are risking foreclosure of the house even before you actually get to purchase it.

Additional tips on how to raise money for your dream house

If it’s a buyer’s market in the real estate industry, know how to take full advantage of it. For instance, you can negotiate to have the seller pay a portion of the closing costs. Bid at least 15% below the asking price or ask them to make the repairs first.

Do a thorough research of the neighborhood if you’re planning to move to a new place so that you would have an idea about the cost of living, the amenities available, the ease of accessibility of everything, and whether the selling price of the house is on-point.

By doing your research, you can know everything there is to learn before buying a house – and raise money in record time so that you can finally get that dream home of yours.

Oana Schneider: Oana Schneider is a published author located in Chicago, Illinois, who currently works for DontPayFull.com as a communication specialist and blog editor. She writes about lifestyle, family budget, has a degree in Communications and advocates for women’s rights. Her future plans include getting a Labrador and losing a few pounds.

View Comments

  • If you start saving for a down payment well in advance of purchasing a home, then you're going to get that house faster. You'll wind up with a lower mortgage, a lower monthly payment, and even a better property in some cases. It's a win-win situation for yourself, so I highly recommend this course of action.

    • I concur with you here. If you can save good enough for a sizable down payment then you'll be way ahead in acquiring your home faster. It's better to start practicing living a frugal life so as to decrease your expenditure. You can also get a side job to increase your income.

    • Wow! This is actually pretty cool. I never actually thought of it as a win-win situation until now and that's pretty cool

  • This is an absolutely brilliant article. As someone who believes a house is where a person spends the largest amount of time in, I love this article. Downgrading a house for the better future house is an absolutely great idea, and is something nobody should be afraid to do. It is something that I currently am doing and honestly, a downgrade isn't always a bad thing either.

  • Well, obviously most people spend more time in their houses instead of anywhere else. We sleep there for eight hours per night, and then spend at least four to eight more hours there doing other things when we're not at work or out having fun. Having a smaller house isn't necessarily a bad thing, although most people think otherwise.

  • It is amazing how the prices of homes in certain areas are so different. Some of them seem like they would take a lifetime to save up for. I think the most important tip for saving to buy your dream house is to make sure you have a large enough down payment. Many people don't realize how much a monthly mortgage payment can be if your down payment isn't large enough.

    • House prices vary on so many factors, but you can always expect to pay more for homes in more prestigious areas or properties that are near water and other significant landmarks. That's just how things are, and you're going to have to pay a premium to land more desirable property, and that premium is probably highest in New York City or Southern California, among a few other areas.

  • Also it would be great if you fix and settle your debts first and not get into the habit of debt before getting your dream house. Taking out a loan for the house is different, it doesn't count. I'm talking about extracurricular debt, or debt you gained from poorly thought out decisions.

  • Excellent points there! Well, everything that comes to my mind is covered. However, I would like to save money right from the first month I join a job. I'd take up a second job or an online money making opportunity to double up my income. Apart from regular savings, I'd create a second savings head for my dream house. Having said that all, I'd give myself some reasonable time frame to buy a decent house. After all, life is too wonderful to be spent worrying. isn't it?

  • Brilliant article that cuts right through the meat! While all of these are mostly a matter of common sense, most people do need a great deal of reminding. Especially when it comes to finances. These are very sound advice right here, so well done.

  • Thanks for your article about average new home costs around the country. Everyone fantasizes about their dream house. You make a great point about how you might want to buy a less expensive house and then improve it later on. There are commercial remodeling companies that handle all kinds of projects. I'll keep your tips in mind as I look for a home to buy.

  • For most people buying a house is the most expensive purchase they will ever make in their lives. There are many ways to save money and budget for your home, and if you do it right you can have a down payment fast. Thank you for sharing this. It really helps a lot.