Purchasing a home is typically the single largest purchase a person will make in his or her lifetime. Although low down payment programs are available, it is a common best practice to put down as much cash as possible when purchasing a home. Even if you don’t plan on buying a house for several years, it is smart to start saving for a down payment now.
Determine what you need to save
Plan to meet with a mortgage lender to discuss your finances and homeownership goals. This professional will be able to assess your financial profile and determine how much of a down payment you will need to qualify for a mortgage that best suits your financial needs.
Assess your spending habits
Examine your bank and credit card statements from the last three months. Look at what you have been spending your money on and then pinpoint areas where you can cut back spending.
These five tips will help you save money and build your down payment fund:
You may be in love with your luxe two bedroom apartment that is walking distance from downtown, but you can save hundreds of dollars a month if you move 10 minutes away and downsize to a one bedroom. Reduced living space can also lower your utility bills as well. Although this may not seem ideal, these kinds of small sacrifices can bring your dreams of homeownership one step closer.
Find a side hustle
Consider getting a side gig that helps bring in some extra cash each month. With services like Uber and Lyft, or even with old-school babysitting or housesitting, earning some additional income is easier than ever. Extra kudos if you can find a way to monetize a passion, like selling your homemade jewelry or baked goods at the local farmer’s market.
Drop or reduce monthly memberships and subscriptions
What monthly memberships and subscriptions do you pay for? Consider canceling your cable TV package and switching to a cheaper streaming service. If you are paying for a monthly gym membership, cancel your membership and put more effort into exercising outdoors, which is free and offers a pleasant change of scenery!
Save your tax refund
While it’s tempting to splurge when you receive your tax refund, try to refrain from doing so and instead put this money towards your down payment.
Set up an automated savings plan
Contemplate setting up an automated savings plan. Similar to a 401(k) plan, you can allocate a certain percentage or dollar amount of your paycheck to go directly into a savings accounts dedicated to your down payment. Since the payment will be automated, you will not have to remember to transfer money into the account and it removes the temptation to spend the money on other purposes.
Need more guidance on tips for saving for a down payment? Contact a loan advisor today to discuss your home financing goals.