You’re finally ready to purchase your first – or next – home, and figuring out that down payment can be tricky. We’ve brought our best suggestions forth to get you saving in the right direction for your home sweet home.
When considering buying a home, the down payment you put up front plays a major role in your future housing expenses. According to the Consumer Financial Protection Bureau, the amount you save can greatly influence your interest rate, monthly housing payment and your need for mortgage insurance.
Typically, lenders require anywhere between 5% and 20% of a home’s purchase value as a down payment. However, the more money you can put down, the better off you’ll be! By responsibly managing your spending and allocating extra cash to a savings account, you’ll be on the right track toward saving for your home purchase.
We’ve put together six tips that could help you cut extra costs and save a substantial amount for your home down payment:
Start by determining how much you’ll actually need for a down payment. By creating a budget to calculate how much you can realistically save each month, you’ll be able to better gauge when you’ll be ready to transition from renter to homeowner.
Consider setting up a separate savings account exclusively for your down payment, having your monthly contributions pull from there automatically. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash.
By doing so, making a down payment on your home will be that much easier. Do a pulse check on rates for your car insurance, renter’s insurance, health insurance, cable, internet, cell phone plan and similar expenses on a quarterly (or even monthly) basis. There may be deals or promotions available that allow you to save hundreds of dollars simply by making contract adjustments.
Within online banking, keeping an eye on your spending is easier than ever! Track where most of your discretionary income is going to identify areas where you could cut back (e.g. nice meals out, vacations, etc.) and instead put that money into savings. While making a peanut butter and jelly sandwich instead of going out for a nice meal at a restaurant may not be ideal in the moment, you’ll be happy when you’re able to make that same sandwich in a home you own sooner than later!
Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants. For example, Gate City Bank offers the MinnStart Loan program, which is available to all Minnesota residents who meet certain qualifications.
Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $30,000 total, consider treating yourself to a nice (but still affordable) meal every $5,000 saved. This will help you stay motivated throughout the process!
Your home sweet home is calling. We’re here to help you get there!