6 Ways to Save for a New Home Down Payment
How are you feeding your piggy bank? Buying a home is one of the best investments a person can make. One of the reasons we hear as to why people don't purchase a home is: "I don't have the money for a down payment."
Buying a home, especially your first, can seem like a lot of hoops to jump through. You have to maintain a good credit score and debt-to-income ratio but also, the ability to bring a down payment in most cases. Sometimes a seller will agree to cover some of the closing costs but the down payment is separate and is a requirement for most loans.
20% of saving is mental and 80% is actually doing. In order to save you have to make some sacrifices. Below are some tips that can help you save that money for a down payment on a home.
1. Reduce Monthly Expenses. Downgrading on monthly services like cable TV, internet, and your cell phone plan can save more money than you realize. Even just shopping around with other providers can prove useful in finding better rates. Dropping Netflix, unused gym memberships, and other non-essentials can add up, too. Also, check current rates for your health, renter's, and car insurance as you may qualify for significantly lower premiums. With these changes, you may save hundreds or even thousands yearly, especially if you are willing to go without all the perks for a short while.
2. Part-time Work. Finding a part-time job or side work can bring in some extra savings for that down payment, so long as you set the money aside. If you are in a field where you can freelance your services, this may prove to be a great way to generate more income for only a few extra hours weekly.
3. Repayment Plans for Student Loans. If you have a significant amount of student loan debt, you may be able to work out a lower monthly repayment plan for government-backed student loans and thus, free up some monthly income to add to your piggy bank. Contact your lender(s) about the options available to you based on your income and other criteria. Sometimes, consolidation may be a helpful option as well. Be sure to run any plan by your home loan originator to be sure changes will not negatively affect your ability to qualify for the home you want.
4. Government First-time Homebuyer Options. Your local, county, or state governments may have programs for first-time homebuyers. You may qualify for one of these programs offering discounts, a minimal down payment, or more. Your home loan originator can inform you of the programs available in your area and work to pre-qualify you.
5. Use a Budget App or Site. It's easy to burn through your paycheck on lattes or quick breakfasts on the way into work. One latte per weekday at $5 a cup comes to $100 per month and just cutting this in half will save you more than $600 per year. Luckily, making and tracking a budget has never been easier. Check out the many mobile apps like Budgt, Mint, or Spendee to track where your money is running off to. Learn to avoid impulse spending and instead make plans for the week like having meal plans and snacks handy.
6. Set Goals to Stay Motivated. Creating a graph or chart with milestone marks and an end goal, can help keep you motivated to skip that latte. Make sure you place it somewhere you frequently pass by daily so you can keep your eye on the prize - your new home.