If you’ve been renting for a while you’ve probably noticed that it’s getting more and more expensive. You may be longing for a place to call your own—one you can make improvements to and update however you like. Maybe all of your friends are buying houses, and you’ve heard the market is really good right now. Plus, having your own home would make it so much easier to be a dog owner. You know you want to buy, but you don’t have a down payment yet. So, what are you supposed to do?
Saving up for a down payment is hard, but you can definitely do it!
Before You Start Saving for a Down Payment
Before you start saving for a down payment, it is worth looking into low or no down payment options in your area. If you are a military veteran, you should talk to your lender about a VA loan.
How to Save for a Down Payment in 6 Steps
Saving up for a down payment on a home can feel overwhelming, but it’s simpler than you think when you have a plan! Here are six steps that can help you reach your goal:
Step 1: Have a Goal
Before you start saving, it’s important to know exactly how much you need. If you can, go for a 20% down payment. Putting down 20% means no private mortgage insurance (PMI)—an extra cost required as part of your monthly payment just in case you don’t make payments on your loan.
Step 2: Create a Timeline
The more time you spend saving up, the more money you can save up. The more money you save, the less your mortgage loan will cost in the long run. Two years should give you a pretty good timeline for saving.
Step 3: Stash Your Cash
Setting your down payment aside in a money market savings account is a great place to park it. You’re not going to make tons on interest, but you won’t lose money either.
Step 4: Cut Expenses
Paying attention to your spending will be important while saving for a down payment. Some ways to cut your budget? Slashing your gym membership, eating out less, spending less on clothes, and cutting your cable bill. The savings can add up to hundreds of dollars a month.
Step 5: Pause Your Retirement Savings
If you’re planning on buying a house in the near future, hold off on your retirement savings and redirect those funds toward your down payment. It’s temporary, so don’t worry. Once you’ve purchased your home, you can get right back to hitting your retirement savings goal.
Step 6: Make More Money
Picking up a side gig or a second job is a great way to help save for a down payment. Tutoring, dog walking, or ride sharing are a few great ways to earn extra income and boost your savings!
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