Saving for a new home can feel incredibly overwhelming, especially if you are at the beginning of your savings journey. However, being prepared with a reasonable down payment is a vital part of the home-buying process. The recommended amount to save for a down payment on a home is 20% of the property amount. Though it’s not required, “Putting at least 20% down on a home will increase your chances of getting approved for a mortgage at a decent rate and will allow you to avoid mortgage insurance,” according to Nerdwallet.
When creating a savings plan, it’s important to factor in the amount of time you’re willing to wait before purchasing a home and figure out your monthly savings goal. Remember most experts recommend your housing expenses not exceed 28 percent of your monthly income. There are many helpful and free down payment calculators you can use to help determine this.
Once you have an idea of the total amount you will need to save for your down payment, it’s time to come up with a plan of action. Consider these simple ways to save money without making a huge change to your current lifestyle:
Set-up automatic transfers into your savings account.
One of the most efficient ways to avoid spending money is to have an allotted amount automatically transferred to your savings account every pay-period. If you don’t see the money in your bank account, you’ll forget it is even there, while your savings account is gradually racking up.
Set aside any bonuses or tax refunds.
Spring means showers, flowers — and tax return season. If you receive any money back on your taxes or a bonus at work, consider putting the majority of it directly into your savings account. As tempting as it might be to purchase new clothes, electronics or furniture, consider your long-term goals and how saving that money gets you there faster.
Put the cost of one dinner out per week toward savings.
If you’re looking for an easy way to save without making a huge change to your current lifestyle, consider skipping a meal out every week to cook at home. You’d be surprised how quickly the savings add up.
While sticking to a disciplined budget can seem overwhelming at first, these tips are a great place to start outlining your down payment savings plan. During this journey, keep yourself motivated by remembering what is at the finish line: homeownership. Your future home could be closer than you think.