Nowadays, owning your dream home isn’t as impossible as you’d think. With so many options and programs available, homebuyers can get mortgages with down payments as low as 3 or 5 percent. Although this is true, it might better to put down as much as you can since a bigger down payment could lower your monthly payments. It’s important to keep in mind that you not only have to save for a down payment but for closing costs and other unforeseen expenses as well.
Before you start saving money for your down payment, you should note how much you’ll need to save. Consider sitting down with a licensed loan officer to determine what you can afford and what mortgage you might qualify for. It’s also a good idea to establish a timeframe of when you’d like to be in the market for your new home. If you’d like to buy your home in the next year, you might have to put away more money each month than if you are looking to buy in five years.
How to Save For a Down Payment
1. Start a budget
It’s easier to keep track of your spending when you’re following a budget. Start by calculating your monthly net income after taxes, then budget for your monthly costs such as rent, car payments, bills, etc. The remaining amount you have left is for other expenses like gas and groceries. Start keeping your receipts to keep track of your miscellaneous spending each month.
Once you’ve determined your monthly costs, it’s time to decide what can be cut out. Little things like eating in more and dining out less could help save some money. Giving up things like weekend getaways or yearly vacations could put a big chunk of money aside as well. Figure out what costs are unnecessary and can be cut so you can put that money towards your down payment instead!
2. Automatic Transfers to Savings Account
Having a set amount of money transferred from your checking to your savings account each month is a nice push to boost your savings. It makes things more straight-forward when you don’t have to think about it. Consider setting an amount that you’re comfortable with after calculating your monthly budget then schedule an automatic transfer each month to go into your savings account. Your savings account will build up in no time.
3. Set Aside Gifts, Bonuses, Etc.
It’s nice when you receive your tax return in the mail or a get a birthday card with some extra cash inside but resist temptation to go out and spend it right away. Rather than spending this extra money you’ve received, tuck it away into your savings. It seems a little harmless now to spend the money but it’s actually one step closer to getting into your dream home!
4. Consider Letting Go of Possession
Maybe it’s time to let go of your baseball card collection or that mountain bike if you no longer have any use for it. A yard sale or setting up an eBay store to get rid of some things you don’t need anymore could be a great influx of quick cash. Not only will this clean out your garage, but it’ll also put some money into your savings. Moving into your new home will be easier and faster if you’re not holding on to any junk you don’t need.
5. Look Into Down Payment Assistance
A good option to consider is a down payment assistance program. See if you qualify for any of these programs through a mortgage lender. Down payment assistance could be a huge help if you’re trying to buy your home in the next year or so.
The biggest part of saving money for a home is to stay on top of your goal. If you’re not motivated to buy a home soon then it’ll be even harder to cut back on expenses and save money for the down payment. Try keeping your vision and goal in mind each time you’re tempted to splurge on something you might not need. It’s also important not to get discouraged. Here at Sun West, we want to do everything we can to help get our clients into their dream homes. If you’re feeling like owning a home isn’t in the cards for you, feel free to reach out to us and we’d be more than happy to help you come up with a plan because it’s possible!