How to Save For a Down Payment on a House

Planning to buy a home in the future? If so, you’re probably wondering how to save for a down payment. That can be an overwhelming task, especially if you’re not good at saving! Once you get going and you see your savings growing, you’ll become more confident, and before you know it, you’ll be house hunting!

The sooner you get started, the better. In this article, we take you through the key strategies for how to save for a down payment on a house!

How Much Do You Need to Save For a Down Payment?

Knowing your goal gives you something concrete to work toward. Before you figure out how to save for a down payment on a house, you first need to know how much to save. That will depend on the purchase prices of the homes you’re interested in and the type of loan you’re applying for.

Start your research by looking at current list prices for homes in different areas. If your dream location is priced out of reach, investigate nearby areas for something that fits your budget more comfortably. Be open to options; you may be surprised by what’s out there for you to explore; even if you’re a big-city person, you may find a delightful small town a short drive from a major city.

Once you have an idea of your price range, plan to save 20% of the purchase price and 2% to 5% for closing costs. That may look like a lot of money, but remember that the more you put down, the smaller your loan and your mortgage payments will be!

Assess Your Financial Picture

Getting your finances in line is the next step to how to save for a down payment. Take a good look at your entire financial situation: your income and fixed expenses, investments and other assets, and your current debt.

If you don’t have a budget, look at the things you’re spending money on and see where you can afford to cut. It’s worth keeping track of everything you spend for at least 2 months so you can get a good picture of where your money is going. Consider cutting things like subscriptions, gym memberships (if you’re not using them), and that extra cappuccino in the afternoon. It all adds up.

From your budgeting preparation, you’ll quickly see where you can cut back. Use that information to set limits for how much to allow yourself for each category. Explore apps that make budgeting easier, but be sure not to spend too much on them!

How to Save For a Down Payment with a Dedicated Account

Direct your savings to an account in a way that’s painless for you. Automated withdrawals from your main bank account into an account that’s not accessible at an ATM is a great way to force you to save. Talk to your financial institution about products and services that can help you with this. While you’re there, ask about account types that carry a higher rate of interest.

When you’ve identified regular expenses you can cut back on, put that money in your dedicated account. You already know you can do without that money, because you’ve been spending it every month, so don’t redirect it to something else you can do without.

Boost Your Income

This may sound obvious, but it’s a solid strategy. Remember that you don’t have to do it forever, and you don’t have to do it continuously. You can take a second job, work side gigs, or freelance for a few days here and there; anything extra is literally money in the bank. If your work offers overtime or extra pay for working on holidays, get on the list.

Lower Your Housing Costs

Assess your housing needs and figure out if you can live in a more affordable place. Does it make sense to move back in with mom and dad or to get a roommate for your current place? Could you get a cheaper apartment outside of the downtown core or in the suburbs? It may not be your ideal living circumstances, but it’s in the service of owning your own house down the road.

Lighten Up!

Look around your place for things you can sell; even items that have no apparent value to you could be worth a lot to someone else. There are plenty of platforms that don’t charge you to list items, so take advantage and have fun!

Bonuses and Windfalls

If you get an annual bonus or you have a great quarter for commissions, put that money directly into your dedicated account.

See If You Qualify for Mortgage Assistance Programs

Federal, state and even local programs may offer grants or assistance for your down payment or mortgages with lower down payments. Check to see what special offers there are for first-time buyers, military members, low-to-moderate-income families, and people buying in rural areas. Lenders and housing counselors are often a good source of information for this, as are real estate agents.

Stay Consistent

Saving a large amount of money takes time and discipline. The good news is that it can be motivating once you see your dedicated account growing, and you’ll feel energized to stay on your path to homeownership.

How to Save For a Down Payment on a House with Smart Strategies

The amount of your down payment will seem enormous at first, but many others have been where you are, and if those people could do it, you can, too.

Take your first step to homeownership today with the strategies discussed above, and get saving for a deposit on your dream home!