Saving for Your Down Payment
Research has shown time and again one of the greatest hurdles to home buying is coming up with the –
sometimes dreaded – downpayment. Here are a few practical strategies to help you clear the hurdle
and come up with the cash you need.
6 Steps to Saving for a Down Payment
1. Plan for progress.
Savings isn’t all dollars and cents. It’s a little emotional.
To remind you why you’re in the savings game, it’s a
good idea to find a few visuals – photos or a list of
features of your dream home. When you’ve chosen
your reminder, store it close to your budget, wallet,
or in the place you pay bills to remind you of what
you’re working for.
2. Slow your spending.
The biggest enemy of spending is the impulse to buy.
When you’re tempted make a purchase over $25, wait
10 days to decide whether it’s something you really
3. Spend less for convenience.
Your mother was right, good things take time…and
so do cheap things. From coffee on the go to lavish
meals out, most consumers are paying quite a bit for
convenience. Become friends with your kitchen to
help your bottom line.
4. Drink more water.
According to the National Soft Drink Association,
the average American household spends about
$850 annually on sweetened drinks. In contrast,
water costs just a penny per gallon. Make the switch
to water and you’ll start your life as a homeowner
not only richer, but a bit healthier too.
5. Track expenses.
Experts agree, the only thing more powerful than
creating a budget is actually reading and tracking it.
Schedule some time every week to review your
spending habits and find new ways you can save.
6. Eliminate the excess spending.
Locate the excess in your budget and slash it.
Trade the gym for home workouts, swap
expensive movie nights for checking out free
videos from the library, and keep an eye out at
the end of each month for services you aren’t using.
Serious Sources for a Down Payment
If you’re serious about saving up these
sure fire moves will help you reach your goal.
Tax refund: You know it’s coming, why not
use it toward your down payment? If you’re
really serious about home ownership, talk to
an accountant about tax planning to make
sure there is a little green at the end of the year
to help with your down payment.
Borrow from the 401(k): It’s not losing your
retirement, but rather using a piece of one
investment to make another. First-time
homebuyers can borrow up to $10,000 from
their Individual Retirement Accounts (IRAs)
without paying early withdrawal fees. Talk to
your 401(k) or IRA administrator to find out
how it will affect your retirement.
More work: Yes, we said it: more work. If
you’re serious about reaching your down
payment goal, consider spending a few hours
working part-time. Ten hours per week at $10 per
hour for a year will get you $5200 closer to
Payroll deductions: One of the best ways to
save money is to hide it from yourself. Redirecting
some funds from your direct deposit to a special
savings account can be a great way to trick
yourself into saving.