Are you planning on buying a home? Like many people, it is probably the largest purchase you will make in your lifetime. If you are a first time home buyer, you are probably wondering where and how you can save up for a down payment. A down payment is a one-time cash payment and its size will affect the mortgage payment you will be making on a monthly basis. Typically, the down payment is about 5% to 20% of the home value. If you are trying to save up for a down payment on a home, below are a few down payment saving tips for first time home buyers to help you in your home ownership journey.
Establish a Budget & Timeline
Using a budgeting app to record your income, taxes and expenses is the easiest way to identify how much money you are left with each month. The next step is determining how much you will need for your down payment. With these two figures, you can easily calculate how much you can afford to save per month to reach your down payment savings goal to become a home owner.
Have a Separate Savings Account
Establishing a savings account where you automatically make monthly contributions towards your down payment savings can also help you reach your goal. Creating a separate savings account specifically for down payment savings will help you track and reach your savings goal without getting it mixed in with other finances.
Reduce Monthly Expenses
Saving for a down payment is important, and many times, the only way you can save the amount you need to is by reducing your expenses in other discretionary areas. By spending less on discretionary items such as dining out, clothes, and more, you will have more to save. Shop around for better car insurance rates, health insurance rates or cell phone plans to also free up some of your budget. You will be surprised that there are deals available to allow you to save extra each month.
On top of the above down payment saving tips, you can also closely monitor your monthly spending. Keeping all your receipts will enable you keep an eye on your spending habits and help you identify areas where you can cut back.
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