Buying a home isn’t without its hurdles. And perhaps the most difficult hurdle to jump is coming up with enough of a down payment toward your purchase. It’s highly unlikely that you have thousands – perhaps even tens of thousands – of dollars laying around just waiting to be spent. If you do, good for you – you’re ahead of the game. But if you don’t, coming up with the 3.5 percent down payment for an FHA mortgage or the 20 percent down payment for a conventional mortgage can be a real obstacle, especially considering you’re likely managing rent and living expenses as you try to come up with the right sum of money.
No matter what type of mortgage you’re shooting for, here’s a look at five ways to save money toward that all-important down payment:
- Monitor spending: To analyze your spending habits and determine ways you can save money, download an app, like Mint or SpringCoin, to help you track your expenses. These apps integrate with your bank account and help you to better see where your money is allocated each month. They can be a huge money management tool for trimming spending and boosting savings.
- Refinance debt: If you’re still paying off a loan, do some searching to see if you can refinance through a new lender. Often times, banks and credit unions will offer lower interest rates for auto and student loans if you refinance through them, which can save you tens of dollars each month. You can also refinance credit card debt, but beware, depending on your interest rate, it may not be worthwhile to refinance and 0% credit cards often are accompanied by transfer fees.
- IRA: Do you have an individual retirement account (IRA)? If so, and if you’re a first-time homebuyer, you can cash out up to $10,000 from your IRA without being subject to any early withdrawal fees. Withdrawing some money from your IRA is a great way to meet or give you a good start toward your down payment savings goal.
- Reduce living expenses: With a little bit of ground work, you can likely reduce your monthly living expenses by a fair amount, allowing you to put the excess savings toward a down payment. Check into your car insurance premiums and see if you can get them cheaper elsewhere. Or consider eliminating premium channels from your cable plan, if not your cable TV package altogether. If you haven’t already done so, cancel your home phone service and rely solely on your cell phone. You might even look into your current cell phone plan to see if you can reduce the minutes or texting allotment based on your monthly usage.
- Other ideas: Some other ways to drum up money toward a down payment include cashing in stock, selling luxury assets (i.e. boat, motorcycle, valued collectibles) or even going as far as selling your new car and purchasing a used one, banking the difference in cost in the process. Finally, don’t consider your tax return as “fun money” anymore – put that toward your down payment savings too.
Saving for a down payment may take awhile, but by implementing the above tips, you can be well on your way to that new home purchase faster.
Are you looking to Purchase your First Home?
Are you currently planning on buying a home in the near future? How are you preparing to purchase your home? Are there certain items and strategies you are following to help save money for a house? Please let us know…. we would love to hear your thoughts. We will reply back in a timely manner to all comments, and answer any questions you may have.