It’s no secret, putting a big down payment on a house helps you get a mortgage. It helps you get approved and helps keep your monthly payment down. But saving up thousands of dollars can seem rather overwhelming. Here are some simple ways to save for a big deposit on the house of your dreams.
Look at Your Spending Habits
The first step might not be the most pleasant. It’s time to look at your spending habits. Look at your bank statements over the last two months. Where do you spend the most money? Look at every penny. Consider things like coffee stops, eating out, shopping for clothes, and beauty appointments. Can you eliminate any of these habits in order to save money? You might be surprised to learn just how stopping your daily coffee habit can add up to significant savings.
You might be privy to windfalls and not even realize it. Any money you receive occasionally is a windfall. Think of things like your tax return, bonuses, and raises. This is money you did not have before. Why not sock it away for your down payment? If you were able to live comfortably without it before, you can save it for your future home.
Make it Automatic
It’s easy to spend money when you see it. What if you don’t see it though? Most banks offer the ability to automatically deposit money into your savings account on a regular basis. Take a look at your budget and see how much you can afford to save each month. A good goal is to save 20% of your paycheck each month. This leaves 80% for fixed and variable costs.
Going back to your past monthly bank statements, determine how taking 20% out each month would affect you. Are you needlessly spending that money? If so, change some habits and direct the money directly to your savings account. It’s the ‘out of sight, out of mind’ mentality. If you don’t remember you have the money, you won’t spend it. Eventually, your bank account will start stacking up and you’ll have money for a down payment.
Bank Every $5 Bill
This might sound like nothing, but again, every little bit adds up. Every time you have a $5 bill in your wallet, put it away. Not letting yourself spend $5 bills can quickly add up to a larger down payment. Of course, it will take time for $5 bills to make much of anything, but if you are diligent about it and keep this habit for years, you might be surprised at how much money you have.
Drive an Older Car
It’s easy to think of buying a new car when your older car needs work. Rather than dumping more money into your car, you assume you’ll buy new and take the monthly payment. Over the course of the loan, that new car costs you a lot more than those repairs, though. If you are serious about buying a house, keep driving that older car, making the repairs as necessary. You’ll have the extra money available to save for your house. This can also help keep your debt ratio down when it comes time to apply for the mortgage.
The best piece of advice we can give you when it comes to saving for a home is to start early. Before you even think about looking for a house, you should have started your savings plan. You can start while you are renting an apartment as a young adult. Remember, every dollar counts. The earlier you start, the more time the money has to compound. Without you adding any new money, your investment will grow and you’ll have the money you need to buy a home.
These simple tips are things you can implement in your life now. Even if you can’t save 20% of your paycheck or you need your tax return to fix your car, every little bit counts. As you make strides and get more financially secure, you will begin to be able to save more. The earlier you start, though, no matter how small, the better off you will be in the long run with your large down payment and ability to buy the home you want.