Down Payment Saving Strategies

Coming up with a down payment can be the one of the biggest obstacle when buying a home, especially for first time home buyers. No matter what type of loan you choose, you will likely have to put some amount of money down. Saving up for a down payment can seem like a daunting task, but with the right planning and budgeting you can reach your savings goals faster than you think. Here are a few strategies that can help you save for a down payment:

 1.     Know how much you need to save

The first step is to determine how much you will need for a down payment. Since you won’t know the exact amount of your down payment until you find a house, estimate how much you will need by looking at average home prices in your area. Depending on the loan type and lender, down payments usually range from 3.5% to 20% of the purchase price. Talk to a lender early on in the process and get pre-qualified. If you know how much you can potential be approved to borrow, you will have a better idea of how much you need to save for a down payment.

 2.     Create a budget and cut spending

Examine your spending habits and determine where your money is being spent. Make a list of all of your monthly expenses, such as car payments, insurance, rent, utilities, groceries, gym memberships, going out to dinner, shopping, entertainment, travel etc.  Take a close look at the list and determine what expenses you can reduce or eliminate to meet you savings goal. By making a plan to lower your monthly spending and setting and sticking to a budget, you can reach your down payment savings goals and be ready to buy a home sooner than you think.

 3.     Set up a dedicated savings account

Open a savings account that will only hold money for your down payment. This can help reduce the temptation to use the money for other purposes, keeps you organized, and enables you to track your progress. After you have determined what expenses can be cut from your budget, you can add these funds to your separate savings account and start building the foundation for your down payment