Saving money is not always easy. And when you’re trying to save money for a down payment, the task may feel more difficult. But it doesn’t have to be! While buying a home requires a healthy amount of savings, it’s possible with some planning and focus.
Before you begin
Saving for a down payment can feel overwhelming. That’s why it’s important to know how much you need before you start saving, By knowing what your goal amount is, you’ll be able to create a savings plan that works for you. While most lenders look for a 20% down payment, you may be eligible for a lower down payment depending on your loan. Check with your lender for more details.
Now that you’ve determined your target down payment amount, let’s talk about some ways you can start saving for a down payment.
Set up automatic transfers
Use automation to your advantage! Set up automatic transfers from your checking account to a dedicated savings account for your down payment. This is the most popular and convenient way to save. Your bank will automatically transfer the funds at the frequency you set without additional work from you. There are several savings apps you can use to create automatic savings as well, like Digit or Acorns.
Wondering why should you set up a separate savings account from your current one? Easy: out of sight, out of mind. Using a separate savings account dedicated to your down payment will keep you from spending your earmarked cash. Another benefit: you can earn a bit of interest as you’re saving so find a bank offering a high interest rate on savings accounts.
Pay off other debt
Paying off other debt (credit card, personal, car or student loans, etc.) will mean you have more money available each month to save towards your down payment. Do whatever you can do to reduce your current debt so you can dedicate more resources to your down payment.
Lower your expenses
Take a look at your expenses and figure out what you can reduce or get rid of. Maybe instead of paying for cable, you can switch to a streaming service. Be careful here; choose one or two streaming services to use, otherwise you run the risk of having a bill that matches your cable bill.
Make lunch or coffee at home
The daily coffee or lunch habit can be costing you a lot. You don’t have to skip these treats entirely! Maybe instead of eating out every day, consider bringing a lunch three or four days out of the week and eating out once or twice. Likewise, if you have a multiple cup a day coffee habit, try making your morning cup at home and treating yourself to a coffee out in the afternoon. Deposit the money you would have spent into your down payment savings account.
Use some smart shopping strategies to help cut your grocery expenses. Avoid shopping on an empty stomach to keep impulse purchases to a minimum. Create and stick to your shopping list. Buy non-perishable items in bulk (just items you already use and love!). Choose the store brand instead of the national brands, and look for sales and coupons for items you use regularly.
Unsubscribe to mailing lists
Remove the temptation to shop by unsubscribing to marketing emails. These emails are designed to encourage you spend money with sales and special offers.
Sell stuff you don’t need or use
Chances are you have plenty of things in your home that aren’t being used. Instead of letting them take up space, put them to good use by selling them. You can use online marketplaces like Facebook Marketplace, OfferUp, Ebay or even Craigslist. Or you can host a yard sale. Bonus points: you’ll end up with less to pack up when it’s time to move!
Get a side hustle
Pick up a side job and dedicate every penny you earn towards your down payment fund. Depending on your skills, you can start doing freelance work or join the gig economy by driving for a car service, walking dogs, pet sitting, babysitting, or even tutoring.
Don’t look at saving for a down payment for your dream home as an impossible hurdle. By breaking it down into smaller, more manageable goals, you’ll feel like saving is achievable. You’ll be able to see the progress you’ve made and stay motivated to continue. If you’re serious about buying a new home, it’ll be worth temporarily passing up on expenses to fund this important goal.
Hayden Homes is here to help when you’re ready to buy a new home. We build new single-family homes in Idaho, Oregon, and Washington for every stage of life. Visit us on our website to learn more about our homes and new home communities. We’re looking forward to welcoming you into your new home.