Looking for advice on how to save for a down payment to buy a house? I know for me, in the past, it’s seemed daunting even trying to imagine how I could save enough for a down payment. I mean, whether you’re looking to gather $5,000 or $50,000, if you don’t already have that money set aside, the task can seem overwhelming. Well, I’ve got the exact steps you need to take to get you on your way to having the funds you needed to buy your new home. Keep reading for a list of the 7 essential steps you need to help you save for a down payment on a house.
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How to Save for a Down Payment on a house
- Set a money goal – how much do you need? I’d like to encourage you to start with contacting a lender. Have them pre-approve you for a loan. This will give you a good starting point. They’ll take a look at your income and debt to income ratio, credit score, and be able to tell you how much home you can buy. And knowing’s half the battle! So now that you know how much loan you qualify for and have a rough idea as to the loan product you’ll get, you’ll have a better idea of how much you should save. Will you be able to get a loan with only 3% down or will you need to put down a 10, 15 or 20% down payment? Tip: if you have 20% down payment, you’ll avoid the extra fee of PMI (private mortgage insurance) every month.
- Set a time goal – when do you want to move? Of course, the longer you wait and stack those chips, the more house you can buy. But most people have a deadline in their mind for some reason or another. Either your lease is up, or you have a job offer. And maybe you’re just tired of renting. Either way, taking the amount you need with the date you need the money will tell you how aggressively you need to be in saving your money.
- How will you get the money? Now that you know much money you need and how aggressive you need to be to reach your time goal, you need to make a plan to actually get the money. I’ve got 16 creative ways to save for a down payment on your home. For example, there are ways you can get extra money, from adjusting your budget, to actually earning more.
- Track your progress – when my Hubby and I were saving for our current house, we tracked our savings rate like a hawk. Every purchase we made needed to fit within our budgeted amount. And then like clockwork, every Saturday morning by 9am, you’d find us at Starbucks talking about our weekly spending, how much we had moved into our savings account, and how on-track we were. I’ve gotta say – I think this is the big reason why we were able to save as much as we did. We created a plan and stuck to it. Mint, you know I love this software, has a goal tracking section on the website that allows you to set and track your goal of home ownership. Setting these milestone targets will help make sure you’re on track.
- Create a cushion – now, I’m an entrepreneur, which means that I’ve got a little bit of risk taker in me. But life is teaching me that having a buffer is just plain smart. Give yourself a few extra months to save, put a few extra dollars into savings every month if you can. And brainstorm a few extra ways to generate or save more income, just in case. If your goal is to have a down payment for a house, make this your biggest goal for the year and don’t let anything stand in your way.
- Choose a place for the money – be smart about this one, ya’ll. Some people need to see the money every day just to stay encouraged and some people can’t know how much money is there because they’ll be tempted to spend it. Do what’s best for you. I recommend you put the money in a fairly liquid and easy to get to account like a savings account. Don’t expect to earn a lot of interest, but that’s not your goal with this money. Your goal is to save, save, save. You can easily open up another savings account with your bank and possibly even create an automatic savings plan.
- Be patient, focused on persistent – these three may certainly be last but they’re not least! Although, isn’t this the same with any goal? To actually reach your goal of home ownership, you need to be patient (‘cuz this does take time) and stay focused on your goal. Done let obstacles take your attention away from your dreams. And through it all, no matter what comes your way, stay persistent.
Want to make sure you don’t lose focus when saving for a down payment on your new home? This easy to use Down Payment Savings Tracker will help you keep your savings goal top of mind with an easy to see reminder of how much progress you’ve made!
Bonus: work on your credit – improving your credit score may help reduce your down payment and lower you interest rate.
How to Save for a Down Payment on a House
We just covered the 7 essential steps you need to take to save for a down payment on a house. To help you reach your goal, download the free Down Payment Savings Tracker to help you keep track of your savings goal. Download it now for free.