For many buyers, one of the most difficult things about buying a new home actually happens before a realtor is called or a home is toured. This difficult task is saving enough money for a down payment. I have had countless conversations with people at social gatherings and networking events that revolve around the task of putting away enough money for that “nest egg” to buy a home. My experience is a bit shocking because the Evansville Tri-State housing market is quite affordable compared with other regions and cities throughout the country. I have many friends from college who live in and around Chicago, IL and even just a couple hours south in Nashville, TN who are buying apartments and homes three to five times more expensive than my little family’s four-bedroom abode. I have experienced my fair share of sticker-shock, that’s for sure!
I started thinking about some of the creative ways we have found more money in our budget to pay down our mortgage. As I did, I realized that the same practices could be beneficial for those who are first-time home buyers, those wanting to upgrade, or those wanting to put money aside to invest and eventually turn a profit.
Traditionally, buyers put down 20% on this big housing investment. However, now there are many financing options available that only require 10%, 5% or in some cases a 0% down payment. To prepare, really think about how much home you can comfortably afford. Discuss financial matters with your mortgage officer and set a goal for how much money you’d like to put down on your new home.
It’s wise, financially speaking, to put as much money down as possible on your new home, but we all understand how difficult it can be to put money aside to prepare for that down payment or pay extra on our existing mortgage (great idea to build equity!).
Building up savings is always a good idea, but it’s especially crucial when your goal is to buy a home. Now, back to the focus of this blog: sharing some realistic, effective savings tips for anyone saving for a down payment or working on building more equity. With some help from these tips, it can be done!
Read on for 13 ways to cut down on spending. Before you know it, you’ll be ready for that new home!
- When shopping, compare prices and ask your favorite stores to price match when you find a good deal elsewhere.
- Make a list when you go shopping and stick to it. Consider shopping at a discount grocery like Walmart or ALDI and rack up substantial savings.
- Put loose change in a jar, and at the end of the month put all the money in your savings account — it will add up quickly.
- If you get a tax return in the spring, put at least half of it in savings. If possible, just stow away 100% in the bank!
- Aim for short-term savings, like $20 a week for three months and place all that money in savings. You’ll be surprised how quickly that practice becomes a habit.
- Have a set amount of money automatically put in your savings account each time you get a paycheck.
- Visit coffee shops like Starbucks sparingly, as most specialty drinks are about $5, and bring your lunch to work (going out can be $10-$15 each day).
- When shopping for clothes or shoes, never pay full price. Wait for them to go on sale and put that extra money in savings.
- Put away your credit cards for a while. Try to cut back to only the essentials and stash the extra money in savings toward your down payment.
- Practice the three-day rule: If you find something you want, put off buying it for three days. More often than not, the urge to buy will pass and you can keep that extra money.
- Have a yard sale after deep cleaning your home and garage this fall and put all profits right into savings.
- Cancel any unused memberships — Gym? Country club? Fruit of the month? If you don’t use it, get rid of it.
- Call your cable, trash, cell phone, and insurance companies and tell them you’ve found better rates elsewhere. Chances, are they will reduce your costs by 10-15% because they want to keep your business.
What else are you doing to save money for a down payment this year? I know many of you are very financially savvy, so I’d love to hear your advice!