For many people, saving up a down payment is the hardest part of becoming a homeowner. Ideally, you’ll want a 20% down payment so you can qualify for a mortgage from the widest choice of lenders and get the most competitive rates. But even if you don’t plan to put that much money down, most lenders do require at least 3%.
How can you save for a home down payment quickly so you can set down roots in a place of your own? These four tips can help.
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1. Rework your budget
If you’re hoping to save enough for a down payment quickly, you should rework your budget to make this a priority. Consider redirecting money from other non-essential spending, such as your dining out or entertainment budget.
To figure out how much to save, decide how much you need for a down payment and what your timeline is. This will enable you to determine exactly how much to put aside each month. For example, if you need a $25,000 down payment within a year, you’d need to save $2,083 a month. Aim to budget for as close to that amount as you can — even if it means cutting other things.
Remember, the sacrifice you’ll be making is temporary and you don’t have to strip all the fun out of your budget forever. You can even keep a picture of your dream house in your wallet on top of your credit cards so when you go to spend money, you’ll remind yourself what the sacrifice is for.
2. Consider a side gig
Picking up some extra work on the side could give you more money to put into your down payment account. Whether that’s overtime at your job or using one of the many apps that allow you to earn money doing various tasks during your downtime, every extra dollar you can earn will put you one step closer to homeownership.
3. Look into grants and assistance programs
If you haven’t purchased a home before or your income isn’t very high, there may be state or federal assistance programs designed to help you save up a down payment and purchase a home.
You can find out about some of these sources of aid by visiting the Department of Housing and Urban Development website.
4. Save your windfalls
There may be times when you come into unexpected cash. This could be a tax return, a bonus at work, or a holiday gift.
When you receive any extra money that you weren’t expecting, put it immediately into a down payment fund so you can increase the amount you have set aside for your future home. If loved ones ask what you want for the holidays or for your birthday, you can also ask them for a contribution toward your home purchase instead of gifts.
By reworking your budget to regularly set aside more money, exploring programs designed to help you become a homeowner, saving your windfalls, and picking up some extra income, you should be able to save for a home down payment more quickly than you ever imagined. Just make sure you are otherwise financially ready to buy a home, and then move forward with shopping around for the perfect mortgage lender and the home of your dreams.