How to Save for a Down Payment
Thinking about buying a house? Consider these tips to get started saving for a down payment.
It can take years to save up enough for the down payment on your first home. Speed up the process by saving smarter. There’s no better time to get started than right now.
- Set a clear goal.
You may have plans to save a full 20 percent down payment or more, or you may be thinking 10 percent or less is more realistic. Get an idea of house prices in your preferred area to help evaluate your plans. And, don’t forget to save for extras such as closing costs and fees.
- Establish your budget.
Once you have your goal, decide how much you want to save each month. Review your expenses and income to see where you can adjust to save more. Look at reducing restaurant outings, cutting cable, canceling memberships and avoiding extra clothes shopping.
- Set up automatic transfers.
Set up recurring transfers from your checking account to your savings account, perhaps every time you get paid, to start saving automatically. Start by transferring smaller amounts, maybe $20 or $50, and see if you can increase that number over time.
- Skip vacations for awhile.
When you’re seriously saving, consider abstaining from vacations. While everyone needs a break, vacation costs can add up to thousands of dollars per year. Try a movie night or dinner party at home to have more economical fun.
- Consolidate debt.
If you’re carrying high-interest balances, investigate rolling all your debt into one lower-rate loan or credit card. You’ll streamline your finances and save on interest payments while paying down your debt faster—a win-win!
- Get another job.
If you have the time and energy, look into part-time work for an income boost. Retail, food and hospitality and taxi driving all offer flexible hours and financially worthwhile opportunities. Or, consider selling your unused belongings online for a cash bump.
- Save windfalls.
Expecting a bonus, raise or tax refund this year? Instead of earmarking that extra money for a new TV or shopping spree, plan to put it directly in savings. You won’t miss what you didn’t have, and you’ll be that much closer to your goal.
- Keep your old car.
The longer you keep your existing wheels, the more you can save. Plus, avoiding new debt helps your credit score, which matters when you get your mortgage.
As you’re saving, remember to take time to reward yourself for a job well done. It takes time to amass a mortgage down payment, so be sure to treat yourself once in awhile to help you stay motivated and on track.
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