Even if you aren’t buying a house in the near future, you should probably start thinking about saving for the down payment, the bigger the down payment, the lower interest rate you’ll have to pay.
Are you renting a home right now? Rents are skyrocketing every day and if you are currently renting a house or a room you should track how much money you pay per month and per year in your housing, you will be surprised how much it is!
Saving money for your down payment is not something that schools teach you and that is why we have created a list of ways to get you started.
Set a Goal
Start by setting a clear goal and know exactly how much you need or you want to save. What would be a good down payment? We recommend you to save at least 10% of the value of your dream home. If you can save 20% is even better because there is something called Private Mortgage Insurance or ” PMI”, lenders add that insurance to buyers that put less than 20% down because they consider the loan a higher risk. In order to set a clear goal you should ask yourself the following questions:
- How much money do you need for down payment?
- How long you need to achieve your saving goal?
Deposit a fixed amount in a special savings account every month
This is one of the most common ways people save money. Determine your monthly income and see how much you can put into this special savings account that is just for the down payment of your first home. When you are buying a house, you also need to remember that you will need some extra savings for closing costs and your regular living expenses.
Cut down on your vacations for a year
We are sorry to bring this up but you could save a lot of money if you cut or reduce your vacation for a year. However, if you really need a vacation, try to do no more than 1 in a year or find really cheap destinations. Here are some other substitutes for an extravagant vacation:
- Do staycations in your city
- Find free things to do near your city
- Do a city tour
- Stay local/regional
Pay off your highest interest rate credit cards
Credit card interests can seriously hurt your ability to save. Start paying off your highest interest credit cards first and then start paying off the ones with low interest rates. This way, you’ll save a lot of money on interest rates. Find out if your low interest rate cards would allow you to bring some of the debt from your high interest rate cards. That’s another way to save money!
Cut down your expenses by prioritizing
Eliminate the expenses that are not a priority. You could put all the money into savings instead of on “unnecessary” things. Here are some examples on how to prioritize:
- You don’t need to eat outside that often, cook healthy at home because groceries would cost you way less. Just go out to eat for special occasions.
- Cut down on buying “fancy” clothes. Let’s be real, you can easily buy cheaper options of clothes and save up for buying a house.
- Find a cheaper option for all the “services” you acquire on a daily basis like haircuts, pedicure, spas, etc.
Find a side hustle
Side Hustles are a great way to expand your income portfolio. This could be both fun and productive. There are many ways to do side hustles. Some examples include babysitting, pet sitting, tutoring, blogging, or you can even get a part time job in your own field. It may seem a lot right now but once you are a homeowner, this will be worth it.
Sell the Extra Stuff in your house
We all have those things in our homes that we never use and are just there taking the space. You can sell them online on Facebook Marketplace or Craigslist. Got some old clothes that you don’t wear anymore? Sell them on Poshmark or Marketplace. Got old furniture that is useless? Sell it. You can even do an old fashioned Garage Sale or street sale and you can make $500-$700 in one saturday afternoon.
It may look like a long road right now but the sooner that you start, the sooner you will see the results. Your dream of homeownership is right around the corner.