A crucial part of purchasing a home is having a down payment in hand. It is the upfront payment to buy a property. So how can you save up this lump sum of money?
Start with a positive attitude and mindset! Have a firm belief that each dollar you are saving is a step closer to achieving your goal of homeownership and the many benefits it brings. It may take some time, discipline and perseverance to stockpile dollars, but in the end, you may be able to make one of the biggest purchases of your life. What an accomplishment it will be!
Ready to put in the work? Here are 10 tips to do it.
- Set a savings goal: Determine how much you need to save, and set a realistic timeline to achieve it.
- Create a budget and stick to it: Many of us do not like limits and restrictions on our lifestyle, but when you have a savings goal in mind, it may be necessary to keep track of all your expenses, stay within the spending threshold and find places to cut costs if necessary.
- Automate savings: By setting up regular automatic transfers from your checking account to your savings account, you’ll be able to consistently save money without having to think about it and you may be less likely be tempted to spend the money elsewhere.
- Save your windfalls: If you receive a bonus, a tax refund, or any other unexpected income, by putting it directly into your down payment savings, you may be able to get significantly closer to your goal.
- Reduce debt: By making dents on your debt, you could free up money to put into your savings.
- Consider a second job: More income could mean you can reach your savings goal more quickly.
- Downsize: If you’re currently renting a home that is too big, consider downsizing to save on costs and put that extra money that you would have spent on rent toward your down payment.
- Save gift money: Same idea as windfalls. If you receive monetary gifts for a birthday or holiday, set it aside in your down payment savings to help you expeditiously reach your goal.
- Look for down payment assistance: Perhaps saving a large sum of money is too much of a struggle. Not a problem! Many state and local programs offer financial assistance to first-time homebuyers. They can help cover a portion of the required down payment, which can allow homebuyers to purchase a home sooner rather than later. Some programs can also help cover closing costs, which can further reduce the financial burden of buying a home.
- Check your employer benefits: Some employers offer down payment assistance or housing programs as part of their employee benefits. Some common employer-provided benefits related to down payment savings are:
- Homebuying counseling: Some companies offer homebuying counseling to their employees, which can include education regarding the homebuying process, credit management, and financial counseling, which can help employees improve their financial health and prepare them for homeownership.
- Financial assistance: Some employers offer financial contributions to an employee’s down payment and closing costs. This can help employees achieve their dream of owning a home sooner than expected and reduce the financial burden of buying a home.
- Employee-assisted housing programs: Companies can partner with outside organizations to offer special home-buying programs for their employees. These programs can include incentives such as a contribution to the down payment or reduced interest rates on the mortgage.
- Flexible spending accounts: Some companies offer flexible spending accounts (FSAs) that can be used for down payment savings. FSAs allow employees to set aside pre-tax dollars from each pay period into a separate account designated for qualified expenses, such as a down payment on a new home.
With these tips, you can begin setting aside funds for a down payment and move closer to owning your dream home.
Have questions on how much to save or what local down payment assistance programs are available to you? Contact us today.