How to Save for a House Down Payment
Many people believe that the minimum down payment on a home is 20%. That’s not always true. The more substantial down payment on a house, the less you have to finance with a mortgage. Although this may seem like a great idea at the time, saving for a down payment may not be your top priority and may be difficult. Here are a few ways on how to save for a down payment for your dream home!
1. Set up an interest-bearing savings account or investment account
If you are setting aside a lump sum of money each month, make sure that the money is accruing interest! Setting aside money is one of the easiest and best first steps to saving for a down payment. Set up automatic monthly deposits into a savings account, so you are not tempted to spend that money.
2. Try to reduce your monthly expenses
If buying a home is your goal, you may need to make a few sacrifices. Eliminate unnecessary monthly expenses, such as eating meals out and entertainment. Cutting down on minor costs at the moment may not seem important, but those savings will add up in the long run!
3. Set up a timeline and make target goals
Write down a personal financial goal. Make sure it is specific, measurable and realistic. Decide if your goal is short-term or long-term and how much money you need to save to reach your goal. Think of ways to achieve that goal, such as cutting expenses, earning extra money, etc.
4. Sell some of your investments
Do you have money tied up in other ventures? It may be the perfect time to sell some stocks or bonds so you can re-invest that money into a new home.
5. Pay off high-interest-rate debt
Credit cards tend to have high-interest rates. Pay down your credit card debt, so you don’t owe more in interest down the road. Also, make sure to pay down any other debt that you may have, including student loans, auto loans, etc. By paying down debt, you can focus on saving for a down payment.
6. Get down payment assistance
Are you wondering how to get down payment assistance? People can get cash gifts from family or friends for a down payment.
How Much Do You Need Down to Buy a House?
The down payment amount may vary depending on the loan program, loan amount and your financials. When you are considering purchasing a home, speak with your mortgage lender to determine what down payment is required for the desired loan program.