There’s nothing more exciting than the prospect of owning a home. At the same time, becoming a homeowner is also one of the biggest financial decisions you’ll make. The fact is that, depending on your financial profile, buying a home can require you to have a healthy savings account. Today, the median home price is around $331,533 across the United States. With a conventional loan, you typically have to bring a 20% down payment to the table, which roughly equals $66,300. While you can put down less (some loan programs and incentives allow as little as 3% to 0% down - ask us for more details), today’s highly competitive market means that cash reigns king. The more upfront cash you have, the better your offer will look to a seller. But let’s face it, most people don’t have tens of thousands of dollars lying around. And while it’s daunting to save up such a large amount of money, it’s not impossible.
Here are nine easy ways to grow your homebuying fund.
1. Open a savings account (house fund)
No matter how much you’re trying to save, the first step is to open an account specifically dedicated to your house fund. We all know the temptation of keeping money in your checking account. Open a separate savings account so that you can stash money away for your down payment. Set up automatic recurring transfers into your account. This way each time you get paid, money will go directly to your house fund.
2. Take a hard look at your budget
One of the simplest yet most effective ways to save up for a house is to create a budget. In the age of debit and credit cards, it’s all too easy to get carried away with spending. Before you can start saving up for a house, you have to know how much money you make and how much of that money must go towards expenses. Knowing how much you can comfortably afford to save each month makes the process a lot simpler.
3. Reduce your expenses
We’re all guilty of spending money just because we can. But if you’re serious about buying a home, you’ll want to reduce your expenses. By eliminating unnecessary spending, you can take the money you’re saving and divert it into your house fund.
There are countless ways to downsize your budget, including:
- Eating home-cooked meals
- Reducing impulse buying
- Using coupons
- Bundling services (ie. cable and internet, insurance, etc.)
The less money you’re spending, the more you have to save.
4. Pay down debt
While it may seem counterproductive to divert extra income to paying down your debt, doing so actually helps you in the long run. One of the first things that lenders look at when deciding if you’re a worthy borrower is your debt-to-income ratio. The more debt you have, the riskier of a borrower you are. Having a high amount of debt could mean a higher interest rate. It may also mean that you have to bring more to the table.
5. Increase your income
Just as you want to reduce or eliminate unnecessary spending, another part of saving up for a down payment is to bring in more money. Have you been working the same job for some time? If so, maybe now is a good time to ask for a raise. If you aren’t due for a pay increase, consider selling items that you no longer need. Start up a side hustle to bring in some extra cash during your spare time. Testing websites, driving for a ridesharing company, or picking up some form of freelance work are all great options. The more money you’re able to make, the easier it is to save.
6. Rent a room
If you have an extra bedroom in your apartment, consider renting it out! This is a great way to make use of the space you have while earning some extra cash. Check out sites like Airbnb to get started. For those who live in the city, renting out assigned parking is another way to make money. This can be an amazing source of income, especially on the weekends when the city is busy.
7. Move back home
There's no shame in moving back home to save some serious bucks so that you can purchase a house. Living at home is likely to be much less expensive than paying rent each month. This is a great way to accelerate saving up for a down payment.
8. Vacation locally
There’s nothing better than exploring a new destination. However, traveling is also quite expensive. Once you decide to buy a home, chances are that you can’t afford to spend thousands of dollars on a vacation.
Instead, save that money and use it towards building your down payment. But this doesn’t mean that you shouldn’t take time off to relax and enjoy.
Consider a staycation. Visit historical sites in your area. Spend a day at a local spa with your best friend. Attend a local art class. Take a mini road trip to the next town over. There are many ways to get away without spending tons of money.
9. Embrace Crowdfunding
Do you have friends or family members who are more than willing to pitch in toward your goal of homeownership? Put the word out there and you may be surprised who’s willing to help!
There are several platforms that are specifically designed for home buying crowdfunding, including Feather The Nest and HomeFundIt. These platforms allow you to spread the word to your social circle so that people can contribute to growing a down payment.
Ready to take the first step in buying a home? The team at Summit Funding Inc. is here to help. Let's make your homeownership dreams come true!