Are you ready to buy your first home and need to save up for a down payment? If so, here are a few ways to help you to quickly save for a down payment to buy a house.
When buying a home, you will need between 5 – 20% of the purchase price of the home – depending on the type of loan you get.
This could be a lot of money that you may or may not have saved up already.
Which is terrifying, especially when you realize that the down payment doesn’t include the closing costs and other fees associated with buying a home.
And though you can put down 3.5% down for a FHA loan, it will benefit you more the closer you are to that 20%.
The benefits of having a larger down payment include:
- being able to qualify for better loan rates (you’re less of a risk if you have more skin in the game),
- decreasing the likelihood of having to pay PMI (which is insurance for the lender if you were to default), and
- giving you more wiggle room in your budget.
So, make saving for a larger down payment a goal if you want to buy your first home sooner rather than later.
Now, let’s make becoming a homeowner a reality for you with these fast ways to save for a down payment to buy a house.
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I’m a huge proponent of setting up automatic savings to help you to tuck away money. For some of us, saving is very difficult. It’s also the last thing we usually think about when creating our budgets, even though it should be the very first.
Setting up your savings account to automatically withdraw funds from your checking account will help you to not think about it while helping you to earn interest on your money.
Most banks will allow you to set up automatic savings withdrawals through them. However, shop around for the best interest rate to maximize your savings. Credit unions are a great option if you are qualified to join one.
Set a portion of your check to go directly into your savings account. Most employers allow you to designate your money to go to two separate accounts.
Another option is to sign up for Digit, which helps you to automatically save money through them.
Save Windfalls of Cash
Instead of spending your tax refund or inheritance, deposit the entire amount into savings. That way you can utilize large sums of cash to go towards the purchase of a home.
Remind yourself that you are saving up for a large investment, so use the money you receive wisely.
Put away any money you receive into an account that has a great interest rate and is easy for you to access.
Save Your Car Payment
If you have recently paid off your car, instead of purchasing another one – put that money into a savings account.
Deposit this amount in your savings account as if you were making a payment. Instead of going to the lender, the money is instead going into your savings.
Just a reminder while going through the home buying process – do not buy a new car! The last thing you want to do is buy a new car. Not only will it lower your FICO score, it will also go against you in regards to the amount of money you have in your budget.
Lenders look at how much money you owe and this will affect the amount of house you qualify for. Either continue riding your car or wait until after closing to buy your home to get a new one.
Get a Side Hustle
Don’t quit your day job because you will need to show consistent income to qualify for a home mortgage. However, you can get a side hustle to help bring in more money each month.
Instead of spending the money you make from your side hustle, just deposit all of it into savings.
Side hustles do not involve getting another job and can be done – on the side and usually involve monetizing a skill you already have. For example, use your photography skills to take pictures of weddings, birthday parties, and even pets.
Here are some side hustle ideas to help you get started in bringing in extra income.
Tap Into Your 401k or IRA
Another option for fast cash for your down payment is to dig into your retirement. Possibly risky, but doing so can help you obtain a larger down payment for your home.
Before taking a loan out against it or withdrawing money from your 401K or IRA, just make sure you understand the tax repercussions you may face by doing so.
Most money will be heavily taxed if taken out before retirement age, but if you can replace it beforehand or far off from retirement age; tapping into these accounts may be a great option for you.
Sell Your Stuff
I’m sure there is plenty of things laying around the house that isn’t getting much use, so get rid of them. You’re moving anyway so start selling stuff that you no longer need, but could be of value to other people.
This is probably the best time to sell furniture, electronics, and old stuff just taking up space. If you have two cars, consider selling one of them to become a one-car family.
You may just find that you don’t need a second car or would be better off with a less expensive car down the road.
Take the money you receive from selling these items and put it directly into a savings account.
Cut Expenses Around the House
My favorite way of cutting from the budget is to get rid of cable. Paying for cable is one of the highest budget buster in most people’s households.
You may find that you don’t need cable and could save hundreds of dollars each month (that can instead go into savings).
If you feel like you’re going to miss out, here are 21+ Ways to Watch TV Free Online.
Other ways to cut expenses is to eat out less, cancel unused gym memberships, or find free things to do around your neighborhood.
Whatever you eliminate or cut down in your budget, put those savings in the bank.
Making these sacrifices will not only help you to save money for your down payment, but you may find out that you can live well without these extra expenses.