Purchasing a home is a huge life goal for many people, but it doesn’t take long to realize that one of the biggest hurdles you can face on the road to homeownership is actually saving up the down payment.
With rent costs escalating all around the nation, now it can be harder than ever to find “extra” money to set aside for the future. However, with careful planning and dedication, you can expedite the savings process and make homeownership a reality sooner than you might think possible.
In this handy guide, we’ll look at nine actionable strategies that can help you save money for your dream home’s down payment faster and more efficiently.
1. Set a Clear Goal
Your journey to homeownership should begin with a well-defined goal.
Research the real estate market in your desired location to understand the average home prices and down payment percentages required by lenders. With this information in hand, set a specific down payment goal and create a budget that outlines your monthly income, expenses, and potential savings.
To illustrate, let’s say you’re eyeing a $300,000 home, and the recommended down payment is 10%. Your goal is to save $30,000 within the next three years. That comes out to $10,000 a year or $833.00 a month (which sounds a lot less intimidating to manage).
Having a concrete plan and a specific goal can help with accountability and focus as you evaluate your spending choices. Measuring your progress against your goals can also help you make adjustments when needed and give you tangible proof that the end is indeed in sight.
2. Automate Your Savings
Leverage technology and automation to simplify your efforts. First, open a dedicated savings account for your down payment so that the money is always clearly separate from your household money.
Then, set up automatic transfers from your primary account to that dedicated account. Treating this transfer as a recurring “bill” ensures consistent progress toward your goal, even if you momentarily forget about it.
Automating savings not only minimizes the risk of spending money you need to save but also eliminates the mental strain of consciously putting money aside each month.
3. Reduce Discretionary Spending
Budgeting is no fun, but you need to be brutal about unnecessary expenses. Take a magnifying glass to your spending habits and identify areas where you can cut back.
Small changes, such as preparing meals at home, brewing your own coffee and reducing impulse purchases, can lead to substantial savings over time.
By redirecting these discretionary funds towards your down payment, you’ll not only accelerate your savings but also cultivate mindful spending habits that will benefit you beyond your home purchase.
4. Go for That Side Gig
A lot of people finance their dream goals through side gigs these days, so look at your abilities and consider what you can do to make a little extra money. Platforms like freelancing websites, tutoring or consulting services can generate extra income while maintaining the flexibility you need for your main career.
You can even turn thrifting into a potential side gig. If you hope to move, why not start by decluttering your living space in advance? Go through your belongings and identify things that you no longer want or need, and see what you can make through online marketplaces, garage sales and consignment stores. The money earned from selling items you no longer use can offer a significant boost to your savings account.
5. Accept a Little Financial Help
There’s no shame in relying on your loved ones for a little help in life. If you have a good support system, consider asking your parents, grandparents and other relatives to forgo their regular gifts for birthdays and holidays and give you cash for your down payment instead.
If it’s an option, you may also want to consider asking if you can temporarily move in with family to reduce your monthly housing expenses. Without a monthly rent payment hanging over your head, you may be able to rapidly fill that proverbial piggy bank all the way to the top.
6. Take Advantage of Windfalls
Financial windfalls, such as tax refunds, work bonuses, or unexpected inheritances, are precious opportunities that you can and should use to boost your savings. Rather than splurging on luxuries, allocate these windfalls towards your down payment fund.
While it’s important to celebrate your financial successes, envisioning the impact of these windfalls on your future home can be a powerful motivator.
7. Prioritize High-Interest Debts
If you have a lot of high-interest debts, you need to clear those off your financial slate as soon as possible. Not only can they interfere with your being able to save up that down payment, they can also negatively affect your ability to get a mortgage loan.
As you pay off one high-interest debt, take the money that would have gone toward that bill and start allocating it to your special savings account. Then, do the same with the next bill that you pay off. That will not only help your credit score, but it will also make your savings grow even faster.
8. Participate in Employer Benefits
Some forward-thinking employers offer assistance programs to help employees achieve homeownership. Check with your human resources department to inquire about any such programs. Employer-sponsored down payment assistance or matched savings programs can give you a valuable head start on your savings journey.
9. Explore GHomebuyer Assistance Programs
Government-sponsored homebuyer assistance programs can be game-changers on your path to homeownership. These programs may provide grants, low-interest loans and the ability to use a much smaller down payment than you might expect.
FHA, VA, USDA home loans and physician loans are all possibilities to explore. Exploring these options can significantly reduce the savings you need to have and accelerate your homeownership timeline.
Remember, consistency and patience are key. Celebrate each milestone achieved and stay focused on your ultimate goal. As you watch your down payment fund grow, you’ll come closer to the day when your commitment to saving transforms into the keys of your very own home.
