If you’re preparing to buy a home, the first consideration you’ll likely make is how you will come up with your down payment. Some first time home buyers are fortunate enough to have family to borrow from, or might even qualify for a down payment assistance grant. However, if you’re like the majority of prospective home buyers, you will be saving for a while on your own for your down payment.
Saving enough for a down payment on the average priced home can seem like a daunting task, so we’ve compiled some helpful tips that will help get you on your way to home ownership.
Take a second look at your savings account. Most people have the standard savings account that was “bundled” with their checking account when they first opened accounts at their local bank. That account might not have the best rates, and you want the money that you’re saving to earn respectable interest for you while it’s sitting in there. Check to see if your bank offers accounts with higher returns – many do, though they may require a minimum balance or scheduled deposits. Online banks are another option to check into – many online banks offer competitive rates on their savings accounts with no extra requirements from you.
Once you have determined that the money you save will be netting you the best return, it’s time for step two – to examine your budget. Most people dread this, but don’t look at it as forcing yourself into a life of deprivation. Instead, think of it as making small sacrifices now, that will help you win big in the end. Imagine how excited you will be when you’re moving into your new home!
Almost everyone has “hidden” money that they can trim from their budget. Do you really need that $5 latte every morning? If not, you could save an extra $1200 per year – small amounts add up! You might be able to downgrade your cable package, or cut cable all together and opt for one of the new online streaming tv services that offer channels at a fraction of the price. Look for additional savings where you regularly shop too – most stores have smartphone apps that allow you to digitally store coupons or earn extra savings when you shop there.
While you’re in your phone’s App Store, check out apps like Ibotta that will reward you financially for the items you already buy. Retail Me Not will help you find coupons to your favorite retailers, and you can even set it to find coupons to stores in your immediate location with GPS enabled. There are also numerous savings apps that allow you to automate savings by rounding up your every day purchases to the next whole dollar, then transferring the spare change to a savings account. The digital age we live in has definitely made it easier to save.
Once you’ve outlined your budget and your savings account is earning the best return on your saved money, it’s time to identify any extra sources of income that can allow you to reach your savings goals faster. This might mean getting a “side hustle” to bring in some extra income, but not everyone has the time in their schedule for a second job – no matter how part time it might be. Instead, you could consider selling items that you have laying around that you aren’t using. The juicer that you bought as part of last year’s New Year’s resolution would surely be worth more in your bank account than sitting in the closet it’s been living in! Also think about the occasional “bonus cash” that you hadn’t planned on throughout the year. If you get an unexpected bonus from work, a raise, or tax refund, resist the urge to splurge and add it to your savings instead. Every amount you add gets you that much closer to being a homeowner.
We know that saving for a down payment isn’t the average person’s idea of fun – but there is a huge reward at the end of it for those that stick with it. The sense of accomplishment you will feel when moving into your first home will make all of the penny-pinching worth it – and once you’ve come up with your hard-earned down payment, make sure you give a Restaino & Associates Realtor a call to help you find the best home for your effort!