Buying a house is a big commitment, and you’ll need a down payment before you can purchase the home or obtain a loan. The bigger the down payment is, the less you’ll need to pay over time to pay off the mortgage. To save the down payment, start by determining the full amount you’ll need to save, typically 3.5-20% minimum of the purchase price of the home, and the timeline you have to save that money. Then, start looking into what you can do to save money.
Put Money into Savings Every Month
Monthly, or every time you’re paid, put aside some of your income into a special savings account. It’s a good idea to choose a set amount to save and to put that aside first before you go shopping or spend the money you’ve made. It’s possible to set up automatic transfers for this, so you don’t forget to move the money to your savings account. Once the money is there, do not touch it until you’re ready to buy a home.
Skip Vacations or Other Large Expenses
If you can skip vacations or other large expenses, put the money that you would have spent into the savings account for a down payment. If you typically travel once or twice per year, that money could add quite a bit to your savings. If you have a large purchase that you can avoid making, any of that money can be used to boost the amount of funds available in your savings account.
Reduce Monthly Expenses
Is there anything you can cut from your typical monthly expenses? If you go out to eat frequently, you could start eating at home more and save quite a bit of money each month. If you spend money on a gym membership, working out at home for a while could help you save. Go through each of your monthly expenses to see where you can save money and put anything saved into your savings account.
If you have any credit cards or other types of debt with high-interest rates, pay them off as quickly as possible. While this does cost a little bit right now, you’ll save a significant amount of money by avoiding interest on these cards. If you do need to keep a credit card open and usable, choose the one with the lowest interest rate. Once the card is paid off, do not carry a balance on it.
Borrow From a Retirement Plan
Some retirement plans will allow penalty-free withdrawals to help those who are interested in buying a home. This means that money can be taken out to use as a down payment without any penalties applying, so it doesn’t cost a lot of money to take money out of the retirement plan early. If you have a company-sponsored 401(k) plan, talk to the payroll department to find out if you can take a withdrawal to use as a down payment.
Do you have any investments? It may be a good idea to sell some of your investments. Cashing in stocks can allow you to bring in money that can be added to your down payment savings account. If you do sell investments, be aware of the tax implications and make sure that it is not going to cause any issues at the end of the year. Remember, a house is an investment, so that money will be back to work for you as soon as you buy a new home.
Look Into Available Assistance
There are a number of different organizations that offer down payment assistance. Check with the FHA, USDA, and Veterans Administration to see if you qualify for assistance. You may also want to check out local organizations to see if there are any programs you might qualify for. Be sure to read as much as possible about any assistance to see if you can combine help or what the qualifications for receiving help may be.
Buying a house doesn’t have to be a faraway dream. If you’re ready to own, start by saving up for a down payment by following the tips here. Within a year or two, it’s likely you’ll be able to save up enough of a down payment, and then you’ll be able to start the search for a home to buy. Make sure you know how much you’ll need to save and set a timeframe to save the money so you’ll be shopping for a home as fast as possible.