Imagine owning your own backyard, a garage where you don’t have to worry about getting your car towed or broken into at some apartment complex or a demanding landlord… This makes it easy to see the appeal of homeownership. What's the main thing that stops a person from snagging their dream home? The daunting cost of the initial mortgage down payment, closing costs, etc.
The fact of the matter is that it takes a lot of work to save money, especially with rising home costs, inflation, and high-interest rates.
With so many of us living paycheck to paycheck, a 20 percent down payment on a house can seem challenging. Why? 20 percent down makes a good dent in what you owe on the house, which makes for competitive interest rates and lower monthly mortgage payments. If you have a conventional loan, a down payment of this size eliminates the need for private mortgage insurance.
It's essential to research the type of loan that is right for you and the amount of money that makes sense to put down on that future home. No matter which course of action you decide, you'll still need to save a significant amount of money unless you’re a Veteran or active duty service member.
Get A Free Mortgage QuoteWith that said, here are five easy ways you can save money for a down payment for your new home:
1. Analyze Your Current Spending Habits
The best way to analyze your current spending habits is to list out all of your monthly bills and then add in the other things you spend money on, like food, clothing, and fun activities. Seeing how much money you spend on getting to-go coffee every morning can be eye-opening. The small things we purchase daily add up over time, making it difficult to realize how much money is spent.
For a more accurate estimate of what you're spending money on, track all of your purchases over one month. You'll be surprised at how much you can save for a mortgage down payment by being more aware of what you buy daily!
2. Look for More Affordable Alternatives
Now that you have a better understanding of your finances, it's time to explore more affordable alternatives to the things you enjoy, whether making coffee at home every morning or switching your $60/month gym membership to a new gym that’s $35/month. Try working out at home for a month or two. Remember, it isn't necessary to eliminate the ways you unwind or enjoy your downtime; just see what other more cost-effective options are out there.
People are often surprised by how much they spend on food, the small luxuries of eating out, and cocktail hour with friends. Maintaining a work-life balance can be difficult, and we often succumb to ordering takeout or turning down that dinner date with friends. Consider meal prepping on the weekend and during the week so you have a budget-friendly way to save on eating.
From switching from expensive cable to an affordable streaming service, canceling a magazine subscription, or using public transportation a few times a week to save on gas, you can incorporate many affordable alternatives without feeling like you're making tremendous sacrifices.
3. Put a Little Money Back When You Can
With two paychecks a month, most of us play first and save later. Reverse that habit! You’d be surprised by how much that little bit adds up over time. Put money away upfront rather than buying clothes or attending a night out with friends. You can consider treating yourself once all your bills are paid and you've put away a portion of your paycheck, but if you are searching for the home of your dreams, it’s the perfect motivation to skip out on those little indulgences!
What's better than setting aside your first monthly paycheck for the mortgage? You can set up direct deposits with your employer that automatically sends a portion of your payment into a savings account. You'll be ready to tackle a down payment and find mortgage options sooner than you think!
4. Monetize Your Hobbies
How to save for a mortgage? Monetize a hobby. Thanks to online platforms, it's easier to start a small business. Not to mention, it’s excellent means of supplemental income!
You don't have to be a skilled craftsman or excellent designer to make some extra money. You can still snag a side gig that will help bring you one step closer to your mortgage down payment goal. When it comes to saving for a house, every bit helps! Several side hustles are available, from online tutoring to driving for Lyft a few times a week. Think about the things you enjoy doing and how you can monetize any of those things without spending money to get set up.
5. Reward Yourself but on a Budget
It's easy to get burnt out when we don't stop and treat ourselves. Set money-saving goals and rewards for hitting them. This will help you become hyper-focused on saving money and ensure you take a break occasionally.
Rewards can be any number of things, from a nice dinner out to a pair of shoes you've had your eye on. Believe it or not, this also helps reduce unnecessary spending, as you have your goal and how you'll treat yourself when you hit it. But remember, the ultimate goal here is really rewarding yourself with that home of your dreams!
5. Eyes on the Prize
It can seem overwhelming if you're just beginning to save for a down payment on a house. Don't get discouraged!
Many have started exactly where you are and have gone on to purchase their dream home with a mortgage option feasible to their current financial situation. Not to mention, there are so many mortgage loans out there that can help first-time homebuyers, veterans, etc.
Put the above tips to use to start saving for your mortgage down payment today! You'll be surprised how much you can put away in just a year. When the time comes to explore competitive mortgage rates that help you save, let Fetcharate help you get started!
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