When it finally comes time to buy your new home, there will be many questions swirling through your head. One consideration that needs to be closely examined is appropriately saving for a house down payment.
In this article, we will review some of the best tips for saving for a house down payment. If you are still feeling like you need some help with the process after reading the following tips, you may consider working with a mortgage professional who can make the entire homebuying process an easy, step-by-step venture.
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How Much Should I Aim to Save for My Down Payment?
Most professionals recommend aiming to make a down payment of at least 20% of the home’s value. However, if you want to have a specific number in mind, many banks have “affordability calculators” which will help provide a more accurate estimate of what you should expect to save for your down payment.
Make a Habit Out of Saving
Realistic, sustainable saving practices are what you want to aim for. This doesn’t mean never going out to eat or not using electricity past 8:00pm. Rather, you should aim to make reasonable saving choices that help you slowly build up your savings over time.
Save Windfalls Immediately
A big bonus at work, gifts from family, or your tax return are all potentially big money items that should be put directly into your savings and not spent on frivolous items or activities. As tempting as it may be to spend this money on something fun, remember your future goal of purchasing your home and put all of your unexpected windfalls toward that dream.
Maintain an Emergency Fund
Be sure to set aside money for any unexpected emergencies such as repairs after a car accident or medical bills. This should be a separate amount from what you are saving for your down payment and the two accounts should be used for their specific purposes. Robbing Peter to pay Paul is always a bad policy (or taking from your down payment savings to pay for an emergency in this case).
Other Ways to Save
Other, more non-traditional methods of generating money and saving are available to you in a number of ways:
- Pick Up a Side Job. Do you have other passions or hobbies that you can monetize? Maybe you play the guitar and can teach local students a thing or two. Whatever you can do for a side gig, even if it’s just a few hours a week, will go a long way toward your savings.
- Opt for Free Entertainment. There are many ways to have fun with spending very little or no money. Taking a short trip to a state park for a hike or watching free entertainment online are good alternatives to entertainment that requires payment.
- Take a “Staycation”. Instead of that expensive beach vacation, kick up your feet at home and have a fun time relaxing away from work, while you keep in mind all the money you are saving and putting toward your house down payment.