Here are the things you need to know to successfully save for a house down payment.
What is a down payment?
A down payment is a partial payment of a large purchase. For example, a down payment for a mortgage is typically between 3%-20%.
1. Get your financial habits set in place now.
Before purchasing a house, it’s extremely helpful if you get financial habits in place. This makes the whole process a lot easier since you’ll know how to handle your money. For example, it’s helpful to know how to budget, save for an emergency fund, and contribute to a 401(k).
2. Start and stick to a budget.
Knowing how to manage your money and spend responsibly is one of the best things you can do for you and your family.
This is how to make a budget.
- Calculate monthly income after taxes. Add up all of your paychecks in one month.
- Track all spending.
- Once you know how you’re spending, you will get a better idea on where you can cut spending.
It’s really this simple. Once you get the hang of budgeting, it’ll become a habit and something you do without even really thinking about it!
3. Create a house emergency fund.
So many things can break in a house and owning a home is an ongoing maintenance process. This is why having a house emergency fund (or any kind of basic emergency fund) is key. A good emergency fund has about 6 months of living expenses. This might sound crazy now, but you can start slowly. If you have nothing saved so far, aim to save $1,000 in your emergency fund and then go from there.
4. Pay off debt.
It’s obviously ideal to be completely debt-free before purchasing a home but that’s not realistic for most people. Being debt-free is just one less thing you have to worry about when purchasing a home. The first step is to stop acquiring new debt and then work on paying off high interest debt first. Although you’re trying to save money for a down payment, it’s just as important to pay off high interest rate debt.
5. Set up automatic transfers.
Make saving easy by setting up automatic transfers. Once your budget is in place, you’ll know exactly how much you can transfer to your savings account for a home down payment. Setting up an automatic transfer into your savings account every pay day is a great way to stay disciplined.
6. Get involved with a community.
There are so many communities out there with people who have the same goals as you. It’s incredibly helpful to see other people on the same journey as you and it’s equally as helpful to see how other people are saving for a house down payment. Instagram, Facebook groups, and YouTube are all great options for finding a community of likeminded people.
7. Ask for a raise.
It doesn’t hurt to ask for a raise because the worst that will happen will be they say no.
8. Side hustle.
If you can’t make any more money at your day job, it’s time to think about side hustles. Side hustles are a great way to earn extra money in your free time.
9. Put extra money toward savings.
Any time you get extra money like a tax refund, work bonus, or financial gift, use this money to go toward your down payment. This can add up to a lot of money every year, especially if your work bonus is 5% of your annual income.
10. Ditch unnecessary spending.
This is crunch time to get your down payment so it’s ideal to cut out any unnecessary spending. Are you going out for lunch everyday? Are you buying name brand instead of generic? Do you have way too many memberships and subscriptions? Are you negating your bills? These are so many ways you can cut extra spending in order to put more money back in your pocket.
Final Thoughts
Saving for a house down payment is 100% doable if you take the right steps to successfully save. You can do this! Buying a home is a big step and having a good percentage of a house down payment is key.
