Are you planning for the future that includes a new home purchase? If so, you’ll need a down payment, so right now is the best time to start planning.
To buy a home, you’ll need at least 20% down. Some lenders require as much as 30%. This obstacle can make it very difficult to save for a down payment if you don’t already have any savings. Luckily, there are strategies to save up the money needed to buy a home. Many of these strategies are even free and can give you enough money in the bank to put down 20% on the house within five years.
Create A Spending Account You Don’t Touch
With most employers gravitating towards a direct deposit for payroll, employees have greater control and flexibility for splitting their paychecks into different accounts. By regularly depositing into a spending or flexible account and not touching the funds, it’s only a matter of time before you begin accumulating a sizable savings account.
Take Advantage Of Interest-Yielding Savings Or Investments
Since many people don’t have thousands of dollars lying around, the best way to save up your down payment is to take advantage of any interest-bearing financial accounts available to you. For instance, Money Market Accounts are a great place to put away money because they typically pay higher interest rates than regular bank savings and checking accounts.
Don’t Overextend On Credit Cards
Using credit cards to purchase expensive items is a great way to get into debt quickly. Credit card companies often charge upwards of 20% interest on every item you buy if your balance isn’t paid in full every month. Spending on credit can contribute to accumulating large amounts of money over the years. Mathematically, the more money you owe on the debt, the less likely you are to save for other things – like a down payment for your home.
Cut Back On Convenience Spending
After the pandemic, many people realized just how much they spent on convenience items, whether it be a fancy coffee in the morning, lunch out, or entertainment. So instead of buying a cup of coffee each morning at $2-4 a day, you can bring your travel mug and make your coffee at home for pennies. Any modifications you can make to discretionary spending habits that turn to savings are a benefit to you!
Use A Budget To Control Your Spending
Almost everyone wants more than what they can afford – that’s human nature. However, if you have everything written down and categorized in a budget, it becomes easier to predict how much you can realistically put towards a down payment over the years. Using software like Mint is a great way to track your spending and money in real-time based on categories. You’ll come to know how much you need to spend per month, or year, to make sure you have enough savings for a down payment on your home.
Start Saving Today!
While there are dozens of strategies to save for a down payment – and time is your friend. A diligent approach and focus towards spending less than you make will be critical in saving up the money you need for your down payment.
Are you planning a move to Colorado Springs? Please talk to me first and start your search for available properties here!