5 Ways to Save Up for a Down Payment on a Home
For most new homebuyers, the first obstacle to overcome is the down payment. While the myth that you need to put down a rigid 20% isn’t true anymore, it’s still best to save up as much as you can. You want to put down enough on your home that your monthly mortgage payment will not exceed 30% of your post-tax monthly income. Use the strategies below to build up a savings account, and you’ll likely be ready to buy a house before you know it.
How to Save Up to Buy a House
1. Set Up an Automated Transfer
Create a savings account for your down payment and don’t touch it for anything else. Set up an automatic monthly transfer to move money from your checking account to that savings account. Choose an amount based on what you can reasonably afford to pull out of your monthly budget.
2. Skip Vacations
You may look forward to extravagant vacations every year, but they take a big chunk out of your budget. Skip those vacations for a year or two, and put the money you would have spent into your down payment fund. It will all be worthwhile when you can call yourself a homeowner.
3. Eliminate High-Interest Debt
Saving up money while you have high-interest debt is working against yourself. Start by paying off your high-interest credit card debt. Choose the card with the highest interest rate, pay it off, and close the account. Once you’ve brought yourself down to two or three cards, make your payment in full every month. This will save you a small fortune on credit card interest and improve your credit score, so you can qualify for a better loan rate.
4. Cash In Your Investments
If you have any other investments that have been doing well, consider cashing those in to pay for your home. You’ll simply be moving your investment money into real estate instead as you buy a house with those funds.
5. Scrutinize Your Monthly Budget
Start keeping a monthly budget, looking at what you spend your money on and deciding what you can cut out. You might find that you are paying for a gym membership you never use or should start making coffee yourself rather than spending four or five dollars at your local coffee shop every day.
When you’re ready to buy a house, JoAnn Meier at RE/MAX First Choice is the local expert Realtor® who will help you find your dream home at the right price. She is an Illinois native who has worked in real estate since 1984 and knows the Waterloo area well. Browse real estate listings on her website, and call (618) 939-6003 to schedule a consultation with an experienced real estate agent.