There are several things to consider when saving for a home.

Lender requirements:

You are going to need a good credit score of ideally 740 or 760 and up. They may want to see two years worth of tax returns, so when planning to buy a home keep deductions on your taxes low. You may also have to show up to 6 months of bank statements so be conscious of your spending habits as they may look concerning. Any cash reserves in savings will act in your favor.

Down Payment:

The money you put down towards the property forms your initial equity. In LA this is typically 15-20%. If you stay below 20% you pay PMI but once you hit 20% equity you can refinance. Get good interest rate deals if you can! You can also pull from your 401K for the down payment. Use lower down payment programs such as VA, FHA, and conventional loans starting at 5% if those are available to you. You can do joint tenancy with another person to share the down payment and interest and pay them back later or even get the down payment as a gift, as each person is allowed to gift $15,000 annually. You can write them a promissory note and pay them back privately later.

How to save money as a couple:

Make saving for a home your priority and cut back on other spending. Lenders want to see that you stay below 44% of your net income to go towards mortgage and property payments! Get an app to track expenses to see where you can save. Automate your savings so you won’t even notice it “missing”. Add a side hustle to increase income.

Where to keep your money:

In a high interest savings account (Ally bank has 1.45% interest on all your money).

Investing:

Don’t invest your down payment as the stock market is too fickle.