Saving for a down payment can seem like a daunting task, but there are several ways to start saving a substantial amount. Below, we’re introducing what a down payment is, along with some easy tips to help you budget and start saving!
What is a down payment?
Down Payments are the amount of money that you spend upfront to purchase a home and are often expressed as a percentage (i.e. “A 20% down payment” or “Putting 20% down on a new home”). Typically, a down payment of at least 20% lets you avoid mortgage insurance. This payment is usually generated from a buyer’s own savings.
How do I start saving for a down payment?
- Get an idea of how much you will need for your down payment.
“Most lenders are looking for a 20% or higher down payment on a conventional loan, but there are options where you can put down much less. However, with a smaller down payment, you’ll likely be required to pay for mortgage insurance. That protects the lender from you defaulting on the loan. If there is no mortgage insurance requirement, there can be other upfront or ongoing fees. You’ll always want to be aware of loan costs.” – Nerd Wallet
- Open a Savings Account
Many banks offer great savings programs and often provide tools such as saving calculators, to help you meet your goals.
- If you can, set up automatic transfers to your savings account.
This will help ensure you meet your savings goals as payments will be automatically transferred over.
- Save your change.
This is an old school trick, but every time you receive a small bill, such as a $1 or $5, put it into a savings jar or transfer that amount to your savings.
- Utilize your phone.
Apps like Mint let you monitor your financials and your credit score and allows you to set different budgets. This will help you monitor your budgets and help you cut costs.
- Turn Your Hobbies into Profit.
If you enjoy crafting, have a secret hand lettering talent, or have a skill you can utilize in a fun way, consider turning your craft into profit. Just recently, a friend of mine started selling aprons and pillowcases she makes in her spare time and has brought in roughly $250.00 in extra monthly income! Just be mindful of your time and don’t spread yourself too thin!
- Cut out what you don’t need.
When starting your budget, take a look at your expenses and see where you can cut costs. I found that drinks are a great place to start- cut down on coffee and cocktails for quick savings!
Don’t forget that you can always talk to an agent about the steps you need to take for buying a home and saving for a down payment- even if you aren’t looking to buy right away! The agents at Dianne Perry & Company would be happy to discuss home buying with you anytime at 910.332.0736.