Get clear on the numbers
Before you start saving for a down payment, it is critical to clarify the exact numbers. Speak with your lender to determine the down payment and closing costs needed on your desired home. They will also know how the local market is growing and choose the right program for you.
Give yourself time
Now that you have a dollar amount to shoot for, you will need to figure out how long you must save towards your goal. For many homeowners, this can span well over a year. If this is the case, make sure to keep in contact with your lender. They can update you if anything changes and how that impacts you specifically.
Five ways to save for a down payment
With this knowledge in hand, you can start to save for your down payment. While it won’t be easy, it is entirely possible if you follow these six tips.
Track your current monthly expenses. You cannot cut your costs if you don’t know how much you spend each month. You can use a spreadsheet, a free online mobile app, or even old-fashioned pen and paper. The goal is, to be honest with yourself and get a clear picture of your current spending habits.
Once you have tracked a full month of spending, you can look at the places where you overspend and start to cut them out.
Eat out less
Eating out is one of the most common habits of families that overspend. Buying groceries and eating in not only means you get cheaper ingredients, but you can also plan meals around using similar ingredients when you buy in bulk.
Press pause on monthly pre-tax contributions
Depending on how much your monthly contributions are to insurance and your 401k, you may be able to save some money by reducing these contributions temporarily. This will depend on your long-term financial goals and health.
Get rid of your monthly car payment
If you are a family with two cars, you might be making two large monthly payments. Downsizing to one car or switching to an older car is a great way to cut large expenses such as car payments and insurance.
Avoid using credit
While it can be tempting to use credit cards for expenses you do not have the cash for, it can make it much harder to save for a down payment. Your credit cards charge you a monthly interest fee, which can be almost as much as the minimum payment. This means that you will be stuck with a monthly payment made up mostly of interest payments.
Saving for a down payment should not be as hard as it may seem. Click here and speak with one of our mortgage advisors. They can help you define your down payment target and put you on a plan to get you there.