One of the biggest American dreams is to own a home and accomplishing that dream requires a considerable amount of money for a down payment. A down payment for a home can range between 3-20% of the asking price, but usually it falls between 5-10%. The larger the down payment, the cheaper the total mortgage will be for the homeowner. With some forethought, discipline and budgeting, you will achieve the American dream.
Here are some strategies to help you save for a down payment and get closer to your dream home.
Open a savings account for your down payment:
Consider opening a savings account that is solely for your down payment. The money in this account is “off limits” and only to be used for your down payment, not for vacations or buying cars. Set up an automatic withdraw from each paycheck to go directly into your savings account; even a few percent points of your paycheck will add up.
Cut back on your monthly expenses:
This is one of the easiest ways to help save toward a down payment. Keep track and write down all of your expenses over a three month period. Study what your money is going to and create ways to cut back.
Eliminate some luxuries. Reduce your trips to the mall, eating out, paying for outside gym memberships, etc. Examine your food bill. And the classic money saving tip, stop getting a Starbucks every morning. Keep track of how much money you’ve shaved off of your expenses and deposit it into your down payment savings account. Streamline this process by having the amount taken automatically out of your paycheck and put into the savings account.
Save extra money:
Throughout the year, save all of your “extra” income above your salary. Deposit all of your bonuses, tax refunds, and cash presents into your savings account for your down payment. All of these incremental funds often add up to substantial amounts.
Owning a home can be an important milestone. Budgeting, saving, and earning a little extra money on the side can help you achieve this goal. Save money for your down payment so you can enjoy living in a home with lower monthly mortgage payments.