Saving for a Down Payment? Try These Strategies
So, you want to buy a house but don’t think you can afford a down payment. Your dilemma isn’t uncommon—and yes, saving money is much easier said than done. But even if you don’t have a lot of disposable income, there are creative strategies to save up for a house.
You might not be able to save enough in the next six months; but with a doable plan and determination, you can realistically grow your bank account over the next couple of years and finally achieve homeownership.
Here are a few easy steps to jumpstart your down payment fund.
Downsize before you upsize
This might seem like a step in the wrong direction, but if you don’t have extra money, downsizing to reduce housing expenses can free up enough cash to build a down payment fund.
Additionally, if you’re renting from your parents or a private landlord, you might ask for a reduction in your rent, and then put the monthly savings toward the purchase of a new house. Or if you don’t want the hassle of moving, get a roommate and share household expenses. If your rent and utilities add up to $1,400 a month, splitting costs with a roommate puts $700 in your bank account every month, which is $8,400 in one year.
Get a part-time job
You might hate the idea of working more, but ask yourself: how bad do I want to buy a house? Nothing’s easy, and buying a home might require a sacrifice of your time and energy. If income from your full-time job only covers living expenses, a part-time job a few nights a week or on the weekends can drum up the cash you need. Earn an extra $500 a month and that’s $6,000 a year toward the purchase of a home.
Host a big sale
One of my friends was so determined to buy her first house that she decided to sell a bunch of stuff for cold-hard cash. This included her extra vehicle which was paid off, a timeshare she purchased several years prior, and she turned some of her older gold jewelry into cash. In the span of just three months she generated an extra $7,000, which was exactly what she needed as down payment on a $200,000 condo.
Use free money
Whether it’s a work bonus or a tax refund, your plans for this money might not include feeding your savings account. It’s your money and you can spend it however you like, but if you save any windfalls for one or two years, you might be surprised at how fast it adds up. You could potentially save up for your down payment without breaking a sweat.
Contribute less to retirement accounts
I’m a firm believer in saving for retirement early and contributing as much as you can to an IRA or 401(k). However, if you want to buy a house and you don’t have a lot of extra income, you might “temporarily” reduce your retirement contributions and then use the difference to buy a house. After purchasing the house, you can increase monthly contributions.
You can have an excellent credit score and enough income, but without cash for a down payment, you might not be able to purchase a home. However, if you use the above strategies to save more, and if you park your savings in a high-yield savings account, you’ll generate enough cash for your first purchase in no time.
Filed Under: Borrower Tips, Down Payment, First Time Home Buyer, General, How-to, Purchase
Tagged with: down payment, financial advice, how to save for a down payment, save money fast, saving money, Savings