5 Ways to Save for a Down Payment
WHAT YOU'LL LEARN
Why saving automatically is the way of the future
Some of the quickest ways to cut costs
The art of the “staycation”
WHAT YOU'LL LEARN
Why saving automatically is the way of the future
Some of the quickest ways to cut costs
The art of the “staycation”
Buying a new home is exciting. Creating a wish list, shopping real estate listings, and daydreaming about all the memories just waiting to be had is a blast. But saving for the down payment? That probably doesn’t sound like fun. While the money to purchase a home comes in the form of a loan you pay back to your lender over the course of several years, the down payment is a percentage of the home’s purchase price you pay upfront. Saving money to make your down payment might seem intimidating at first, but breaking down the process into smaller, more manageable money moves will make it much less daunting. Embrace the frugal lifestyle and try out these money-saving tips that’ll put you on the path to homeownership in no time!
Your Budget is Your Friend
The first step to saving for the down payment is evaluating, or in some cases rebuilding, your budget. Start by tracking where all your money goes each month. The results may surprise you. Once you figure out all the different directions your money is pulled, it’ll be much easier to determine where you can cut back in your spending. Maybe you’re still paying for a gym membership or streaming service that you haven’t used in ages. Or perhaps you’re spending more than you’d like to on fast food each week. Whatever the case is, pay closer attention to your new budget to cut out any unnecessary expenses, then redirect that extra cash to your down payment savings.
Save Automatically
These days, you don’t have to manually transfer money from your checking account to your savings. Most banks offer a pain-free feature to assign a fixed amount from your paycheck to go directly into your savings with no additional action required. You can take your saving a step further by putting your down payment funds into a high-yield savings or money market account to earn some extra interest if you’ll be making deposits for an extended period of time. Remember to read the terms and conditions of your new account before applying.
Brown Bag It and Beyond
We mentioned cutting back on fast food trips and dining out as a way to save money, but if you’d like to give up that extra expense entirely, it’s time to embrace the sack lunch lifestyle! Go back to the basics by packing a homemade lunch for work every day. Take to the internet to find affordable, healthy, and delicious recipes and start planning out your lunch schedule for the rest of the week.
Buy Used
Purchasing used, second-hand, or refurbished furniture, clothes, appliances, electronics, or vehicles satisfy our greatest wants and needs without breaking the bank. Plus, buying used items isn’t only good for saving you a few dollars here and there, it’s also an environmentally friendly habit. It decreases the demand for new items, thus reducing the pressure on manufacturers to rely on emissions to produce items in mass quantities. Buying used is good for the green in more ways than one!
Plan a “Staycation”
Although you may be itching to travel after a pandemic kept us all in place, a “staycation” can still be a fun alternative to a traditional (and potentially expensive) vacation. Staycations are just like regular vacations, except there’s a lot less travel involved (and you don’t need to update your passport). Leave the office behind, shut off your email, and turn your home into a little paradise. The world is your oyster when it comes to staycations, so make your living room a spa (complete with cucumber masks and relaxing ambient music) or camp in your backyard for a beautiful night under the stars. Visit your region’s parks, museums, and festivals for low (or no) cost, and bring the kiddos along - family time is more valuable than any getaway. Get away from it all without ever leaving home!
You Have Options...
The tips above will get you saving for your down payment, but keep in mind, you have options at your disposal. Conventional loans require as little as 3% down. Or, if you want to avoid Private Mortgage Insurance (PMI)An insurance policy that protects the lender in case you default on your loan. Mortgage insurance is required for FHA loans and for Conventional loans when you put down less than 20%.Private Mortgage Insurance (PMI)An insurance policy that protects the lender in case you default on your loan. Mortgage insurance is required for FHA loans and for Conventional loans when you put down less than 20%., 20% down is required. And some government-backed loans range from 0 - 3.5% down:
FHA loans – This program requires buyers to put down 3.5% of the home’s purchase price and will come with monthly mortgage insurance.
USDA loans – No down payment necessary, but mortgage insurance is required and can be paid upfront or financed into the loan for borrowers buying a home in a qualifying rural area.
VA loans – Tailored specifically to active-duty military, their families, and veterans. This loan type requires no down payment or monthly mortgage insurance. However, the VA Guarantee Fee replaces mortgage insurance and is paid upfront.
Reach out today to learn more about your financing options.