Saving for a down payment is often the hardest part of qualifying for a mortgage. While you don’t have to save 20% in order to get a mortgage, you will likely need at least some money down on the home in order to get approved.
Keep reading for the top ways to save for a down payment fast.
Get out of Debt
First, try to get yourself out of debt. Why should you pay 18% or more in interest on your credit card debt while you save for a down payment? If you pay off your credit card debt first, you can save money for your down payment even faster.
Even though it may seem impossible to pay off your credit card debt, you can do it if you were going to save for a down payment in the first place. Not paying interest on your credit card will boost your savings on its own. If you save money every month on interest, you can put that money directly towards your down payment.
Invest Your Money
You probably think there’s no way you are investing your money if there’s a chance you could lose it, but there are safe investments. Think of things like CDs, bonds, and money market accounts. You earn high amounts of interest on these investments, which can help boost your down payment.
While we probably don’t recommend putting your money in stocks or cryptocurrency, there are plenty of ‘safe’ investments that will give you a little boost in interest versus what you would earn if you left the money in your regular savings account.
Get a Second Job
It doesn’t sound ideal, but getting a second job can help you boost your down payment quickly. If you take the job specifically for money to put down on the home and you are good about putting the money right in your down payment account, you’ll reach your goal sooner rather than later.
Start a Side Hustle
If you don’t want to take on a new job per se, you could always start a side hustle. There are things you can do from home, such as a virtual assistant, writer, or you could even sell items on eBay. If you are skilled in a trade, you could work jobs on the side to make money for your down payment. Again, if you are good about putting this money directly into your down payment account and you won’t touch it, you’ll put yourself in a better position.
Take Money From Your IRA
If you are a first-time homebuyer, you may qualify to withdraw money from your IRA for the down payment. The IRS allows you to take out up to $10,000 to use as a down payment on your home. You won’t pay the standard 10% penalty if you withdraw funds for your down payment, but you will still have to pay income taxes on the money you withdraw.
Lower Your Housing Payment
While it may not seem ideal, if you can live rent-free for a while before you buy a home, you could save the money for your down payment. Even if you can’t live rent-free by living with your parents or a friend, you may be able to downsize your rent. If you can find a cheaper apartment or home to rent, do it. Then you can pocket the remaining funds for your down payment.
Cut Out Other Expenses
Everyone has expenses they can eliminate from their budget. Make a list of the expenses you have on a monthly basis and then see where you can cut expenses. For example, do you have a coffee habit or do you go to the nail salon twice a month? These are likely expenses you can cut out of your budget.
Keep track of the expenses that you do cut out of your budget and then save that money for your down payment. Even if it seems like it’s only a little bit, every dollar counts. Before you know it, you’ll have a larger down payment, especially if you invest the money that you save.
If you do a combination of the above tips, you could find yourself with a large down payment much sooner than you thought possible. Saving for a down payment is all about thinking outside of the box. Think about where you can save even a few dollars. Every dollar you save can add up to what surmounts to the down payment that you need.