5 Ways To Save For A Mortgage Down Payment

Ready to buy a home but looking for the funds to do so? Here are some tips and tricks to meet the requirements when the time comes.

Saving for a down payment for a house is no easy task, but fear not – it can be done. While down payment requirements vary by loan type, the more you’re able to save, the better. This can help with your loan approval, give you a better interest rate, and reduce your monthly payments.

Reach your homeowner goals with the following tips.

Saving For A Mortgage Down Payment  

Develop A Savings Goal  

To develop a savings plan, you first need to have an idea of how much you’re able and willing to spend on your home. Our Mortgage Qualifier Calculator can help you estimate how much home you can afford based on your annual income.

Keep in mind, a buyer will typically pay 3% – 6% of the loan amount in closing costs. While you generally must also put 20% of the purchase price down to avoid paying Private Mortgage Insurance (PMI), you can typically buy a primary residence home with a down payment of as little as 3% – 5%, sometimes less. This will depend on the loan type and lender requirements.

Since there are many factors that impact both how much home you can afford and the cash needed to close on the home, it’s best to consult with your lender and apply for a mortgage pre-qualification when ready to obtain a Loan Estimate.

Save Extra Income

Have a bonus coming your way or having a garage sale soon? Stash those funds, plus any other extra income you receive, into your down payment savings fund. Chances are you won’t miss it and it’ll be put to good use when you’re ready to buy your home.

Another effective strategy is to boost your income if possible. This could mean working toward a promotion or starting a second job or side hustle to put more money in your savings fund and reach your goal quicker.

Automate Savings

Once you have a savings goal in mind, it’s time to review your current budget. This will help you determine how much you can reasonably save each month. One of the easiest ways to set yourself up for success is to establish a separate savings account for your dream home.

From there, it’s best to establish an automatic deposit on the day of your choice, like after a paycheck is deposited. If you’re afraid you’ll spend the money, move the money to a completely different account or one that has withdrawal restrictions, such as a share certificate, so there are additional barriers to access the funds.

Skip Extra Spending  

Do you know what you’re wasting money on? Now’s a great time to review your spending habits and identify opportunities to cut back – like cancelling underused subscriptions or minimizing spending on unnecessary things. For example, spending $100 a week on dining out adds up to $5,200 a year. If you find extra room in your budget, be sure to put it toward savings to get you closer to your goal.

Seek Homebuyer Assistance & Resources

Saving for a down payment can amount to thousands of dollars. If homeownership seems out of reach, you may be eligible for homeownership assistance developed to support and aid homebuyers.

Summary

However you chose to save for a home, be sure to set a time frame and stick to your plan. With some sacrifices and careful planning, you can save enough for your down payment and be on your way to homeownership.

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