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Do you wish the rent you’re paying were going into your future? Unfortunately, the down payment required to buy a home prevents people from transitioning from renters to homeowners. 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 determining where to begin. But saving enough for a down payment on your dream home is possible with some creativity and discipline.
Tips for conquering saving for a down payment:
Find out where your money goes. You can only start saving money if you know where your money is going. 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 a good idea to start doing some math to figure out how much you need to save. Select a target dollar amount and a timeline to achieve it. For example, a $25,000 down payment over two years totals $1,041 per month. Sound unrealistic? Either scale down your home desires to something smaller or scale up your timeline. If you can wait three years, the monthly savings goal drops to $694 per 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 savings separate from 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, explore the various neighborhoods in the Prescott Quad Cities area. We have an up-to-date list of homes for sale in the area.
