Saving for a down payment on a dream home can seem impossible. It requires discipline, sacrifice, and commitment to stay on track with your savings goals. However, it’s more manageable than it may seem. There are several practical ways to save for a down payment on your dream home. From budgeting to exploring creative income streams, these six tips can help you stay motivated and organized.
With the right approach, you can reach your goal of owning a home sooner than you think.
1. Pause Other Savings Goals Temporarily
Depending on your savings goals and age, hitting pause on other savings goals to save for a down payment on a house may be your best and easiest option. This might include stopping current deposits to a retirement account or withdrawing from an IRA for your downpayment. One caveat to this is that you should not stop building an emergency fund, nor should you withdraw from an emergency fund for your down payment. The emergency fund may be needed as part of the home-buying process, so it needs to remain untouched other than continued growth.
2. Ask Family or Friends for a Monetary Gift
Family or friends can provide a financial gift toward your house down payment. This must be a gift–not a loan–and you may need to document this gift in a gift letter for the lender. Gifts from parents, siblings, grandparents, or close friends all count and can make the burden of saving for a down payment much lighter if they are willing and able to contribute.
3. Rebuild Your Budget
Another way to save money for a down payment on a house is to rebuild your budget. Take a look at your current spending and scrutinize every expense. Which ones can you eliminate? Which ones can you cut down to a minor expense? Make coffee at home instead of buying it each morning, cancel some streaming service subscriptions, or cook one more meal a week at home instead of eating out. Consider changes such as getting rid of a car that uses a lot of gas and has a monthly loan payment in exchange for a smaller car that you pay cash for.
You may need to be ruthless to save more money faster, but this can be one effective way to save for your down payment. The sacrifices will be well worth it when you move into your dream home. You may also find that you don’t miss the things you give up nearly as much as you thought you would.
4. Find Savings Options That Make You Money
Putting money into a savings account seems like the most logical way to save for a house down payment. Before you plop your money in a regular savings account, take the time to look for options to help your money make more money. Consider high-yield savings accounts, money market accounts, and CDs. You can also ladder CDs to adjust your investments as rates rise and fall.
Consider also thinking about automating your savings, so you don’t even see the money before it’s stashed for your down payment. This might mean setting up an automatic transfer from your checking to your savings or having your employer set up your direct deposit to split your paycheck between your checking and savings accounts. If you don’t see or have access to the money, you won’t even miss it.
5. Match or Stretch Your Money
Depending on where you live, there may be programs that will contribute to your down payment. This may be a contribution from the lender or someone else, but it usually offers a specified amount that they will contribute for every dollar that you put toward your house down payment.
If a money-matching program isn’t an option, you may still be able to stretch your down payment on a house further. You can look for loans that require smaller down payments (20% is not always required) or consider purchasing a smaller house where your down payment is a bigger percentage of the purchase price.
6. Start a Side Hustle
Consider starting a side hustle if your main income pays the bills but only allows a little room to save.
Your chosen side gig can be selling something you make, driving for a delivery service, or part-time childcare, but once you set aside money for taxes, you’ll be able to use the entire profit to save for your down payment on a house. If you decide to try a side gig, make sure that you choose one that doesn’t cost you a lot of money to start.
Are You Ready to Buy Your Dream Home?
Buying a house is a dream for many people, and the house down payment is the first step toward making that dream come true. Saving money for a down payment on a house can seem overwhelming, but it doesn’t have to be. You can use one of these tips or mix and match them to create a unique combination that allows you to save quickly and easily, but either way, you’ll find that you built your down payment faster than you thought possible. Whether you have your down payment and are ready to buy or have a few questions you’d like to ask before you start saving, find a local mortgage broker in your community today.