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Stephany joined the RentReporters Marketing Team in 2021.
Buying a home is one of people’s biggest life goals, and saving up enough money for it can feel like a hefty task. However, having a saving plan can help you put away the amount you need for a down payment on the home of your dreams.
We’ll show you different strategies and tips and tricks you can use to save money for a house.
Budgeting is the most critical step in the saving process. You need to know where your money is going on a weekly or monthly basis. Make sure you know how much money you’re bringing home each month, and include your partner’s income if they’ll also be contributing to your down payment.
Then, review your bank statements and credit card payments to see where you’re spending the most money, such as necessities and non-necessities, and see where you can cut back. This will help you allocate your money wisely and help you add money to your down payment.
You may be wondering how much down payment you need to save for a house and some may say you need a 20% down payment.
But that’s not necessary as many banks now offer conventional mortgage loans with down payments as low as 3% and government-backed mortgages like FHA loans, which allow down payments starting at 3.5%. There are also VA loans and USDA loans, which may require no down payment at all.
The best thing to do is to meet with a mortgage loan officer so they can help you determine what types of loans you qualify for, how much you can afford, and how much down payment you’d need to save. This information will help you start budgeting efficiently.
Having too much debt can make it challenging to save for a house and qualify for a mortgage loan. Identify how much debt you have and see which ones you can pay off quicker by creating a plan to tackle it.
Consider these two different accelerated payment plans: Debt Avalanche and Debt Snowball.
With the Debt Snowball method, you prioritize paying off your smallest debt first, regardless of the interest rate. For example, if you have a $7,000 student loan at a 6.8% interest rate and a credit card debt of $10,000 at a 20% interest rate, you’ll start with the student loan debt. You would still pay the minimum amount due for each debt.
However, you would allocate extra funds to your smallest debt, the $7,000 student loan balance. Once you’ve paid off the student loan balance, you’ll start paying off the next smallest balance, which would be your credit card.
With the Debt Avalanche method, you prioritize paying off the debt with the highest interest rate while making the minimum payment on the rest of your debts. For example, if you have a $7,000 student loan at a 6.8% interest rate and a credit card debt of $10,000 at a 20% interest rate, you’ll start with the credit card debt.
This helps decrease the amount of interest you pay over the loan’s lifetime. The faster you’re able to pay off the highest interest debt, the less you’ll have to pay interest fees.
You can also consider refinancing existing loans to lower your payments or transferring a high-interest credit card balance to a lower-interest card. Pay as much as you can to get out of debt faster.
Another way to save more money faster is to downsize by reducing your expenses and only spending money on things you need. This can also be moving into a smaller apartment or a more affordable area, selling stuff you don’t use, selling your car so that you can add more into a savings account, or paying off significant debt.
Putting a big chunk of your income into a savings account can be painful if you like spending or are an impulsive shopper. If that’s you, consider automating your savings. Decide how much you want to save each month and have your bank automate a withdrawal for the amount you want every month from your primary account into a separate savings account.
This will help you feel less tempted to buy things you don’t need. Remember to schedule your withdrawal on your payday or when you know you’ll have enough money.
There are many ways to make quick money on your own time to help increase your down payment savings. Here are a few ideas to help you get started:
There are many freelance opportunities you can find online that require little to no qualifications and make it easy to earn extra cash to put away for a home.
If you have an extra room in your apartment that you are not using, consider renting it to a friend or finding a suitable roommate to share your space and split bills with. You can also list it online on apps such as Airbnb, which allows you to control who uses your room and when by approving dates and guests ahead of time.
You can also consider renting out any of your assigned parking with an app like JustPark if you live in an urban area where parking is costly and hard to find. JustPark lets you rent out your parking space, similar to renting out your spare room on Airbnb. If you live in a populated area, this can be a great source of extra cash for your down payment.
Is the money you’re making right now not giving you enough left over to put away for savings? It might be time to ask for a raise. First, you need to time it right. The best time to ask for a raise is during your performance review or after completing a big project, not when you’re in the middle of a hectic project or busy season.
Make sure to come prepared with specific performance data and results from projects you’ve worked on, and explain how busy you’ve been and what you’ve been working on and will continue to work on.
Finally, maintain a grateful and confident attitude. Know how much you deserve it, so ask for a raise confidently while showing gratitude for the company and excitement to continue working and growing with them.