6 Ways to Save for Your Down Payment
A 20% down payment is a significant chunk of change. But with enough time to prepare and a little bit of creative budgeting, you’ll be able to save up for your new home sooner than you think. Follow these helpful budgeting tips to get started!
Break Down Your Budget
While it’s never a bad idea to start saving for a down payment, it’s an even better idea to analyze your budget before you consider a home purchase. This will help you set realistic expectations and concrete goals.
First, make a list of all of your necessary monthly expenditures — rent, power, water, phone service, student loans, etc. Add these expenditures up and subtract them from your monthly take-home pay. Then, look at everything that is left over and consider what to cut back.
After you’ve taken a look at your spending, determine what home price range (and, consequently, a 20% down payment) you could comfortably afford based on your current monthly budget. Our handy mortgage payment calculator might help!
Set a Concrete Savings Goal
Once you have an idea of how much money you’ll need to put down toward your new home, set a timeline for your savings. For instance, if you need to save up $20,000 for a down payment and want to move in five years, consider setting a savings goal of $335 per month.
Use a finance app like Mint to track your spending and your savings. Apps like these may also provide you with your credit score, which is essential to receiving the mortgage you need.
Get Prequalified for a Mortgage
Setting goals based on your current spending is a great place to start. To take the next step to buying your new home, meet with a lender about prequalifying for a mortgage.
Prequalifying for a mortgage will let you know how much financing you may qualify for — and how much you’ll need to save for your down payment. When you talk with a lender, ask for the maximum amount of financing that’s available to you based on your credit score and financial history. This may open up a lot of options when you’re searching for homes.
Not sure how to find a reputable mortgage broker? Contact us and we can connect you with a trusted local lender.
Find Creative Ways to Save Money
If you’re having trouble meeting your savings goals for the month, even after you’ve carefully budgeted for the essentials, find ways to cut out superfluous spending or think of ways to earn a little bit of cash on the side. For example, you can:
- Sell gently used clothing and household items at a yard sale
- Substitute a movie streaming service for cable TV
- Collect your loose change in a jar and cash it in every month
- Use coupons while shopping at the supermarket
- Use browser extensions like Honey to save while shopping online
Celebrate Your Accomplishments
Saving for a down payment is no easy task. Every time you reach a major milestone, be sure to congratulate yourself!
Obviously, don’t spend all of that money in one place, but feel free to treat yourself to something special to reward yourself for your hard work.
Consider Home Buying Assistance Programs
Are you still having trouble saving for a 20% down payment? It might be worth looking into home buying assistance programs, such as FHA loans, VA loans, and USDA loans.