How to Save for a Down Payment
What is holding you back from taking the first step to becoming a homeowner? Is it because you’re struggling to save for the initial down payment? We know it can be very overwhelming, and can hold some people back from making the decision to buy instead of rent.
Your friends and family are out enjoying their big backyards, while watching the kids playing on the swing set. Meanwhile, your rent is increasing but you’re not reaping any of the benefits. If you know you’re ready to enjoy all the perks of being a homeowner, but just aren’t sure if you are ready financially, let us help!
The key to saving for a down payment is determination and discipline. Here are some tips on things you can do to save for a down payment:
Set a goal:
The process of saving will be difficult and unorganized, if you do not have a goal. How much do you need to save? In addition, in what timeframe can you generate this money? These are a few things to consider when setting your goal. Everyone’s goal is going to be different, so base your decision off what will be most doable for you.
For example, say you are giving yourself 36 months before you start looking to buy a home. And in that 36 months, you plan to save $50,000 for your down payment. You’ve now set your goal and are ready to begin saving. Now, here are some things that will help you reach your goal!
Cut the unnecessary spending:
Sometimes, we spend money on things that we perceive are a necessity. But, in reality, there is a much cheaper alternative that is as beneficial. How much are you spending monthly to go to the gym? We understand the importance of working out, but there are less expensive alternatives. Do some research of good “at home” workouts, and cancel that gym membership. Doing so could save you up to $60 a month.
We know that shopping for clothes can be fun, but it’s easy to make large purchases on clothing items that you may not need. Start going to thrift stores and consignment shops. Alternatively, hold off on buying an item until it goes on sale. This can save you up to $80 a month.
And is it necessary to buy the most expensive peanut butter in the grocery store when the generic brand tastes the same? A great way to save money is to start buying generic brands. It can save you up to $120 a month.
Another way to cut unnecessary spending is to only eat out on special occasions. (Yes, this includes those morning coffees from Starbucks.) One $4 coffee doesn’t seem that expensive, until you start including it in your morning routine. Along with skipping the morning coffee run, try to start meal prepping and bring your lunch to work. That way you aren’t tempted to always eat out during your lunch break. Doing this can save you up to $300 dollars a month.
Finally, yet importantly, get rid of the cable! You’ll find that you don’t need it as much as you may think. Many studies have shown that the amount of people getting rid of their cable has grown in the last 5-10 years. This trend is expected to continue. If you are looking to save some extra cash for that down payment, join these people and cut the cable cord! Instead, you can try renting movies or reading books. This can save you up to $60 a month.
These are only a few of the many ways you can cut expenses to save money. By taking these steps, you can save up to $620 a month. That’s over $20,000 for 36 months which puts you well on your way to paying that down payment!
Sell your stuff:
How often does stuff collect in your home that you never use or wear? Take some time to clean out your closets, garage, and other storage areas. Then decide what you do and do not need. Start using eBay, Poshmark, and other websites where you can sell your items. If you would rather not sell your clothes and accessories over the internet, there are places, such as Plato’s Closet, that will buy your clothes from you. You can also host a garage sale with some of the bigger items you aren’t using to generate some extra cash. However you’d like to do it, selling your stuff is a great way to earn some extra money. In doing this, you could pocket up to $1000!
Start driving less:
Cars are expensive. From filling up with gas, to getting the oil changed, and everything in-between, owning a car can take a chunk of your change. If possible try to use your car less and use alternate methods of transportation more. Wake up a little earlier each morning to walk or bike to work if you live close by. If your route is a little further, look into taking the bus or the subway. Choosing a cheaper transportation method could ultimately save you up to $20,000 in the course of a 36 month period.
Take on extra work:
You may be wondering if you would have time to work a second job. Many people don’t realize that a side hustle does not have to be very time consuming. Oftentimes, you can set your own schedule.
If you’re into working out, look into teaching a few classes a week at a gym near you. If you’re more musically inclined, try teaching music lessons at a location close to you. Only have time to commit to something on the weekends? You can go online and apply to be an Uber or Lyft driver. That way you can choose to only drive when time permits.
Say you take on 10 extra hours a week earning $10 an hour, that can put you over $15,000 by the time you hit 36 months. Taking on any sort of second job can significantly boost your down payment savings!
After adding up the money you save from cutting expenses, selling your stuff, driving less, and taking on a second job, you’ll find that in 3 years (or 36 months) you will have saved $56,000. Not only does that meet your goal, it exceeds it!
Take these tips into consideration as you start saving for your down payment. Keep a hopeful and open mindset to keep from feeling overwhelmed! It’ll all be worth it when you’re sitting on your porch swing enjoying the comfort of your new home.
Have questions about the mortgage loan process? Contact us today for more information.