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How to Save for a Down Payment for a Home

Starting to save for a home can be a daunting task. You know you need a down payment, but how do you get there? There may be a lot to consider, but we’ve broken it down into easy, actionable steps and helpful tips to set you up for success! 

Explore different down payment options. Not every loan requires the same percentage down. While 20% down has been the most recommended over the years, it isn’t necessary. First-time homebuyers can get loans with as little as 3% down. 

Create a savings plan. Decide how much you want to save for a down payment and make a realistic timeline to obtain that goal. Make sure you also save for closing costs (usually 2-5% of the home price) and keep your emergency savings account full. Factor in moving costs and add a buffer in case something unexpected arises!

Cut out expenses. Once you have your goal set, find ways to achieve that. 

Cut out small and large unnecessary purchases. Anything from eating out less to skipping expensive vacations and opting for local trips instead. 

Reduce high-interest debt. Pay off your high-rate debt so you can have more money to set aside each month. This will also help lower your debt-to-income ratio (DTI), which can get you better mortgage rates and improve your chance to be prequalified. 

Save automatically. Enroll in automatic deposits to stash your cash before you get tempted to spend it. Once you’ve settled on an amount to save each month, set up an automatic deposit. Have extra at the end of the month? Put that aside too instead of spending it!  

Set aside additional funds. If you receive cash gifts from loved ones, get an end-of-year bonus or end up with a tax refund, don’t spend it on something you don’t need. Instead, put it toward your down payment savings and get to your savings goal even sooner. 

Find ways to make additional income. Turn your hobby into a side hustle and use the extra income toward your down payment. Or consider going through your home and selling things at a garage sale or consignment shop. You’ll earn money and prep for moving too!

Curious about how your down payment will affect your monthly mortgage payments? Try our Home Buyer Savings Calculator to get an idea. If you have other questions, contact us today!