Saving for a down payment is a major step towards buying a home. We’re here to help you reach your goal.
For most people, buying a home is the largest single purchase in their lifetimes—and it tends to involve coming up with a pretty sizable chunk of cash for a down payment. Though the down payment amount can vary depending on the loan program or your prospective home’s value, it can still feel pretty daunting to consider how you’ll reach your target number.
Once you’ve determined how much home you can afford, and calculated the percentage of your home’s value that you’ll be putting down, it’s time to start your savings journey. At Simplist, we’re all about making things less scary, and we think it’s less likely to feel like a giant ordeal if you implement small, incremental changes that can really add up in the long run. With that in mind, here are some suggested steps you can take to get you towards your down payment savings goals:
Ditch the debt
When preparing to buy a home, it’s important to get your finances looking shipshape. If you’re carrying a revolving balance on credit cards, you might want to hit pause on your home buying activity until you’ve managed to pay off your debt—or have at least made a decent dent in the amount outstanding.
Why, you ask? Lenders consider your existing debt obligations when evaluating how much you can reasonably afford in terms of a monthly payment and, subsequently, how much they want to lend you. Even if you have a great credit score, an existing balance will affect your debt-to-income ratio—and could potentially affect the terms of the mortgage offer extended to you.
If you’re carrying balances, it might be worth putting in a call to your credit card company—if you have a strong repayment history, sometimes they will be willing to work with you and offer you a more competitive annual percentage rate (APR). It certainly doesn’t hurt to ask!
Examine your expenses
If we take an honest look at our own finances, most of us are able to identify small luxuries we can sacrifice to reach a savings goal. Some examples:
- If you find that the bulk of your favorite TV shows are available via one or two streaming services, then it could be time to ditch the pricey cable package.
- You might’ve gotten used to at home workouts and outdoor runs during the pandemic—how about putting that gym membership on pause?
- Perhaps you could step away from the relationship you’ve forged with your local barista and make coffee at home instead.
- Do you really need to get your highlights touched up every four weeks?
We know it can be tough to forgo life’s small pleasures—but think of the longer-term rewards!
Snag a side gig
Taking on a side hustle can be a great way to bring in some extra cash. Who knows, you might even find a hidden hobby or untapped talent that can also yield real money.
You may wish to wait tables or take on a part-time retail role, but the possibilities are seemingly endless these days. Some budding entrepreneurs leverage their creative skills by taking on freelance writing and design projects; others like to get out and about by walking other people’s pets or driving for a rideshare service. Figure out what works for you and your schedule, and revel in the satisfaction gleaned from being able to put extra money aside each week!
Clear the clutter
If an item no longer “sparks joy,” then out it goes: not to the dumpster, but to an online marketplace listing. After all, one man’s trash is another man’s treasure!
Start with your closet: if you haven’t worn an item in six months to one year, it’s fairly likely you’re not going to again. That pair of skyscraper heels looked great when you clicked ‘buy’ but have been languishing in the closet ever since you realized they give you monstrous blisters; that collection of “loud” ties might once have been your thing, but now your corporate attire is more polo shirt and pressed khakis. After your closet, you can move on to unwanted furniture, or other items you no longer need. Not only will taking time to sell unwanted goods boost your bank balance, it’ll also lighten the load when it comes to moving time!
Supercharge your savings account
Set it and forget it: make sure that the extra money you’ve earmarked for your down payment is automatically deposited into your savings account each month. That way, it’s left your checking account before the temptation to spend it even arises.
It’s also worth shopping around to make sure you’re getting the best possible interest rate on your savings. Although rates have reached historic lows this past year, you’re still likely to secure a slightly better rate by doing some research and weighing your options. If you haven’t already, look into online-only banks: because they don’t have the overhead costs of their traditional, brick-and-mortar counterparts, they are often able to offer more competitive rates.
Saving for a down payment can feel like an insurmountable challenge at times, but it’ll be worth it when you’re clutching the keys to your very own home. Be patient, be realistic, and be resolute—you got this. And, when you’re ready to explore your loan options, let us do the rest of the hard work. Simplist’s friendly and experienced loan officers are here to help you ensure that your home buying experience is as seamless and smooth sailing as can be.