How to Save for a Down Payment on a Home
Buying a home is a big financial step, and can feel overwhelming if you’re not sure what to expect. Saving up enough money for a mortgage down payment is a key aspect of buying a home, and one that comes into play early in the process. It can feel especially overwhelming thinking about how you’ll be able to save that much money unless you break it up into small, actionable steps. It won’t happen overnight, but with time and dedication, you might even reach your savings goal sooner than you expected.
Here are some steps you can take to help you save up for a down payment:
Determine How Much You Need to Save
Having a clear & finite goal to work towards makes it easier to achieve. The standard expectation is to put 20% down, but there are specialized mortgage loans that only require as little as 3% down. Talk with your mortgage lender to determine which mortgage loans you are eligible for and their down payment requirements. The more you are able to put down, the less you have to take out for the loan. A lower loan amount also means lower monthly payments, which leaves you with more room in your budget for other needed expenses.
Make the Most of Your Savings
Make your money work for you by putting it into a high-interest savings account so you can save even more. Commit to never touching your savings for any reason other than your down payment.
Save Extra Money
Save the money from any raises, bonuses, tax refunds, commissions, birthday or holiday money you may receive throughout the year, rather than spending them. If you do need to dip into those extra funds, only take what you need and put the rest aside for your down payment. Saving those larger sums of money will give your down payment a savings a big head start. You may even rack up enough to fast-forward the process and cut significant time off of your savings timeline.
Clean Up Your Budget
Review your purchases for the last few months and see what you are able to reduce or eliminate. Cutting out unnecessary expenses frees up extra cash that you can then funnel directly into your down payments savings. Use Financial Tools, our personal financial management tool, to help you track your budget and savings goals.
Automate Your Savings
Set up a recurring transfer to your down payment savings account for once a month, or even every two weeks if you get paid bi-weekly. Allocating a portion of each paycheck is the easiest way to ensure steady growth to your down payment savings. Automatic transfers make the process seamless, and when you don’t even see the money leaving your account, you aren’t tempted to keep it and spend it elsewhere. You can set up a recurring transfer within Digital Banking.
Rack Up Spare Change
Our Change the Way You Save program allows you to round up purchases using your debit card to the next whole dollar and transfer the additional change to your savings account. This program is designed to help you reach your savings goals as easily as possible, so you can sit back and watch your savings grow. Enroll today by contacting our Call Center or visiting a branch location.
Downsize on Travel Expenses
Consider skipping out on vacations for a year or part of the year, or taking a smaller trip instead of a big one. You’ll likely be saving for your down payment over the course of a few years if you’re starting your savings from scratch, so you may be able alternate and do one big trip every 2-3 years and a smaller trip the other years. This way, you are still able to enjoy a vacation, but without spending as much so you can still meet your savings goals. You could even take the money you normally would have spent on vacations and make a sizeable contribution directly into your down payment savings account instead.
Reduce Debt
Having high-interest debt can significantly impact your ability to save. Commit to paying off your debts and taking other steps to reduce the amount of your monthly budget that goes to loan payments. Refinance auto loans or student loans to get a lower interest rate and reduce your monthly payment amount. A credit card balance transfer is another option to reduce debt with a lower interest rate and lower monthly payments. Put the extra money you are saving into your down payment savings.
There’s no one-size-fits-all amount for a down payment. After evaluating all of your options, opt for a down payment that will make home ownership possible while still leaving you with the flexibility to meet your other long-term goals, like home upgrades or a new car.
If you’re ready to buy a home, let the mortgage team at Robins Financial help you make your dream home a reality. Visit our Mortgage Loan Center to learn more about the mortgage process, and check out our Home Buying Calculators to get a picture of what your home loan will look like in terms of down payment, monthly payment, and more. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.