Can you imagine how long it would take to buy a house if you had to pay for it in full? Thankfully we have home loans, but when it comes to buying a home, saving up for a down payment is still usually the biggest hurdle potential homebuyers face. Mortgage payments can be comparable to rent, but saving up for a down payment often requires careful planning and saving. For some families, building up a respectable down payment can take years. And while it’s certainly possible to find a mortgage with low or no down payment, homeowners who are able to put down 20% can find home loans with lower interest rates and no private mortgage insurance. In any case, whether you’re trying to save up $5,000 or $75,000, use our tips to start filling up that piggy bank.
Saving Up for a Down Payment
Tips & Tricks
To start, figure out the price range of your future home and determine what sort of down payment you hope to save up. To do this, you will need to research home prices in your area, assess your current financial situation (income, savings, spending), and calculate how much you can afford. 20% is generally thought of as the magic number for down payments because with it, you won’t be required by lenders to purchase Private Mortgage Insurance (PMI). Once you’ve come up with a price, set up a savings plan with a goal and a deadline to keep yourself on track.
Now that you have a plan, you can start incorporating our money saving tips to help you make it to your goal at a faster pace:
- Open a separate savings account for your down payment so that you won’t be tempted to spend the money on anything else.
- Pay off your credit card debt so that interest charges won’t accumulate.
- Downsize to a cheaper apartment (it’s only temporary!).
- Review your spending habits and figure out where you can cut back.
- Cut out cable TV.
- Switch to cheaper cell phone service.
- Clip coupons and follow the sales.
- Hold a garage sale.
- Make homemade gifts for birthdays and holidays.
- Find a part-time job.
- Cut back on luxuries like clothing purchases, eating out, and vacations.
- Ask close friends or family if they could loan you some money.
- Refinance your car.
- Reevaluate your auto insurance policy.
- Use a cash-back credit card.
- Bring your lunch to work.
- Borrow from your 401(k) plan.
- If you’re a first-time homebuyer, take money out of an IRA.
Remember that every cent counts! Cutting out the little things (new clothes, a new phone, nights out on the town) can seem futile when you’re trying to save up a lot of money, but it all adds up. With a little time, patience, and diligence, it will be easy to save up for a down payment.
If you live in southwest Missouri and are hoping to purchase a house soon, the mortgage lenders at PrimeLending can help you find a home loan. Give us a call today at 417-616-0782. We would love to help.