Do you wish the rent you are paying was going into your future? Unfortunately, the down payment required to buy a home prevents people from switching from renter to homeowner. Climbing the “down payment mountain” isn’t impossible. It’s about breaking your essential, challenging, audacious goal into practical steps.
Saving for a down payment on a home can be challenging, especially if you need help figuring out where to start. But saving enough for a down payment on your dream home is possible with some creativity and discipline.
Here are some tips for conquering saving for a down payment:
Find out where your money goes. You can only start saving money if you know where you’re spending the money. Track each expenditure for a month or two, no matter how small. Get an objective picture of where you’re spending the cash.
Get specific about how much you need to save. Even if you’re not 100% sure of your down payment amount, it’s good to start doing a little math to figure out how much you need to save. Pick a dollar amount and a timeline to hit that dollar amount. For example, a $25,000 down payment in two years totals $1,041/month. Sound unrealistic? Either scale down your home desires to something smaller or scale up your timeline. If you can wait three years, that monthly savings goal drops to $694/month.
Determine the big moves you can make. How much would you save in rent if you’re in a three-bedroom apartment and can handle the idea of scaling down to a one-bedroom one? What about going from two cars down to one? If you can make them work, these sacrifices will significantly impact your savings goals.
Establish a separate savings account. Having a separate account with a “hands-off” attitude is essential. Keep your dream home money from mingling with your regular checking or savings account. Establish a high-yield savings account with a credit union or money market account to protect and build your savings. Automating your savings is one of the best ways to save for a down payment. This way, you’ll never have to think about it – the money will be there when you’re ready to buy.
Pretend you already have a house payment. Once you determine the approximate amount of a new house payment, start making that payment now. This trick is two-fold. Instead of paying the bank, pay your savings account. It will help you accumulate a down payment faster and ensure you can afford the new house payment.
Mind the risky investment schemes. Once you have a little momentum, it may be tempting to take some of that cash and invest it to make it grow faster. Be prudent about this, as investing in stocks, startups, or high-yield funds can quickly decimate your savings. Be conservative.
Of course, knowing how much home you want to buy is essential when saving up for your down payment. I’m happy to give you an idea of what homes are selling for in your area. In the meantime, check out the various neighborhoods in the Prescott Quad City area. We have an up-to-date list of homes for sale in the area.
Feel free to get in touch at any time if you have questions (928) 830-6976.