6 Tips for Saving for a Down Payment
When preparing to buy a home, one of the biggest factors for your mortgage is how much of a down payment you are able to put down. The larger your down payment is, the lower your loan and monthly payment will be. So, how will you save? Check out our 6 tips for saving for a down payment:
Automate Your Savings
Set up an automatic transfer into a special savings account dedicated to building your down payment. This will ensure that when your paycheck hits your bank account a portion of that cash will be reserved for your down payment. When you don’t see that extra cash sitting in your checking account, you will be less likely to think of it as available cash to spend – which will help boost your savings.
Instead of splurging on unnecessary items when you receive your tax refund, bonus or salary increase, bank it in your savings account. If you can’t resist splurging a little, try to use only a small percentage of that cash and put the rest into your savings account.
Lower Your Expenses
Review your bank statement and look for items you can eliminate or reduce. Are you eating out too often? Are you still paying for a gym membership or online service that you haven’t used in months? Get rid of any unnecessary expenses and put the money you would have spent on these items in your savings account.
Limit High Interest Rate Debt
High interest credit cards can severely impact your ability to save. Try to pay off your high interest credit cards so that your cash isn’t being spent on interest. If that’s not an option, consider transferring your credit card balances to the card with the lowest interest rate.
Borrow from a Relative
Often times a parent or relative will offer to financially help out when it comes to buying your first home. Gifted money can come from your family or friends. Please note that you will need to disclose the amount of money that was gifted to you when you apply for a loan.
Down Payment Assistance Programs
You may be surprised to learn that you don’t actually need to have a 20% down payment. There are various programs available that offer lower down payment options. Check with the Federal Housing Administration, U.S. Department of Agriculture Rural Services, Veterans Administration, or local housing authorities to see if you qualify for any of their down payment assistance programs.