The decision to buy a house can be one of the biggest decisions in your life, especially if it’s going to be your first. You can’t just rush into it. You need to be prepared. While there are numerous factors to consider when readying yourself to become a home-buyer, an obvious big one is money – and specifically your down payment. After all, putting a higher down payment in from the get-go can garner you a lower mortgage rate and put less stress on you financially when your monthly payments are due. But how do you save for a down payment?
Know How Much You’ll Need
Pre-approval is an important aspect of knowing how much you’ll need to save. This is also where creating a timeline is beneficial. If you know that you’d like to purchase a home in four years and have a likely down payment in mind, you can map out your yearly and monthly savings strategy.
Adjust Your Current Budget
Most people will need to make budget adjustments when looking to save for their down payment. This can come from several ways including earning additional income through overtime, freelancing or a second job. To accompany this, it would be advisable to cut back on expenses that can be deemed as luxuries like eating out on a regular basis.
Set Up an Automated Savings Plan
This can typically be accomplished by creating a savings account and having a portion of your paycheck go toward that account. This way acts similar to having auto-pay bills each month. You plan for that money to be taken out, and you just let it do its thing. Now you don’t have the opportunity to haggle with yourself about spending that money.
Any bonuses, atypical commission checks and the like are great, but instead of splurging it all away, you can tuck away that money in your savings account to go toward your future home’s down payment.
Gifts are great, and they can be used for a down payment. If you recently got married, for instance, you can put money you received for your wedding gifts into your down payment savings account.
Save Less for Retirement
You’ll have to weigh your options on this one, but temporarily saving less for retirement is an option you can explore when saving for your down payment. You can cap your contributions and allocate that cash toward the down payment or in some cases you can use retirement savings in your IRA to fund the purchase.
Don’t Go Overboard
The name of the game here is to save, but that doesn’t mean you have to put away every penny you have. Treat yourself every now and then, because this shouldn’t be a burden on your life and having it consume your every move will lead to unnecessary stress.
No matter how you go about it, preparedness is the name of the game. It’s not enough just to know what you’ll need; you need to have a game plan on how you’re going to achieve that goal. That’s why it’s imperative to plan ahead and save for your down payment as soon as possible. If you’re thinking about buying a house in 5 years, now is the time to start saving. So put your plan in place, talk to the experts at Accunet Mortgage about your lending needs and the road to becoming a home-buyer will be that much easier.