Buying your first home is an exhilarating experience, but saving for the down payment on the property can be overwhelming for many individuals. With rising costs of homes, it is no wonder that saving for the down payment is an arduous endeavor for many who have multiple priorities for their money. The bright side is that with the right guidance, reaching your down payment savings goal sooner rather than later is possible for many individuals.
1. Make a Budget and Track Expenditure
Keeping tabs on where your money is going each month is the key to any successful savings strategy. You can begin by looking over your bank statements to determine where your spending falls into two categories: necessary expenses versus discretionary spending.
After gaining an understanding, set up a budget that reflects saving for your down payment on the property. There are costs that can be reduced so that the budget is useful in meeting your goal without requiring much in terms of quality life expenses.
2. Create a Savings Goal and Schedule Transfers
Having something specific in mind makes saving more attainable. Look up the average price for homes in the area where you want to buy, then save for a down payment accordingly. Typically, down payments for conventional loans range from 3% to 20%, with some options for first-time buyers requiring fewer down payments.
After determining your goal, make saving an automatic process by setting up an automatic transfer from your checking account to a savings account each pay day. By doing so, since the funds are being forwarded before you actually have a chance to spend them, essentially, you’re paying yourself first, thus avoiding any temptation to forego saving for one month.
3. Remove Wasteful Expenses and Look for Ways to Cut Costs
Take a closer look at your subscription services. That streaming service or gym membership that you barely use could also be utilized for contributions to your down payment fund. Think of other ways to save money on things such as your cable subscription, cell phone service, or even your daily coffee trip.
In addition to looking for ways to cut expenses, look for ways to stretch your budget even further. Cook at home instead of dining out, buy generic brands at the grocery store, and look for free entertainment in your community. You could also look at putting off expensive hobbies or vacation ideas until you reach your savings goal.
4. Research Down Payment Assistance Programs and Grants
You do not need to save for the down payment by yourself. There are many state and local governments that offer down payment assistance programs for first-time buyers in particular. They offer either grants, low-interest loans, or even forgivable loans that do not need to be repaid if the borrower lives in the purchased property for a certain number of years.
To start, look for programs in your state or city. Programs may be offered by your employer or housing authority as well. Some down payment assistance programs restrict their benefits to low-income individuals, while others allow all first-time buyers to participate. Utilizing these sources could greatly aid in alleviating the burden of saving for down payment expenses.
Bonus: Talk to a Mortgage Broker Early
At this point, before you embark on your savings adventure, it’s helpful to speak to our mortgage brokers at BrickWood Mortgage. We can assist in further understanding exactly what it is that you need in terms of saving, depending on your financial status as well as which type of mortgage you qualify for. There is also the aspect of avoiding pitfalls that a broker could assist with that you might never have thought of on your own.
Start Saving Today
Saving for a down payment requires discipline, but it can actually be done. By budgeting, saving money in an automatic manner, eliminating expenses that no longer make sense, and possibly finding down payment assistance, a down payment on an apartment can be achieved, effectively unlocking the key to the front door in your new apartment!
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This material is not from HUD or FHA and has not been approved by HUD or any government agency.