Buying a home is a big commitment, and it will probably be the largest single purchase that you make in your lifetime. Your down payment is a one-time cash payment that you provide at the closing. The amount of money that you contribute to your down payment has a long-term effect on your finances, as it determines your monthly mortgage payment and your initial home equity. A higher down payment will lower your monthly mortgage payment.
Once you know how much you can afford to spend on your home purchase, it is time to start saving. So to help you get one step closer to purchasing your new home, here are a few things that you can do each month to help you save for that down payment.
- Save a portion of your paycheck automatically. You can choose a fixed amount or a percentage of your paycheck to get directly deposited from either your paycheck or your checking account into a savings account. Save as much as you can so that you can quickly build up your balance and make your purchase as soon as you are ready.
- Save any one-time income. If you get an annual bonus, a tax refund, a large gift, or have side income earnings, save as much as possible to build up your savings even faster.
- Invest your money. If you don’t plan on buying a home for a couple of years, then there is opportunity to invest the savings and try to grow the money a little before you actually need it.
- Make room in your budget. This means you will either need to earn additional income, cut back on expenses, or a combination of both. Some easy ways to cut costs include things like: skipping Starbucks and making coffee at home, limiting the amount of times you eat out each week, skip or limit going to the movies and instead watch a movie on Netflix, or even limit how often you shop.
- Build flexibility into your plan. While you are saving money it is important to remember that there will be other demands on your finances. From car repairs, to uncovered medical expenses, you will need to be prepared for the unexpected.
Outlining a savings plan is the best way to keep yourself accountable and on track, and it is the best way to help get you one step closer to purchasing your new home.