When considering buying a home, the down payment you put upfront plays a major role in your future housing expenses. According to the Consumer Financial Protection Bureau, the amount you save can greatly influence your interest rate, monthly housing payment and also your need for mortgage insurance.
- Develop a budget & timeline. Start by determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month – that will help you gauge when you’ll be ready to transition from renter to homeowner.
- Establish a separate savings account. Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash.
- Shop around to reduce major monthly expenses. It’s a good idea to check rates for your insurance, cable, Internet and cell phone plans. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts.
- Monitor your spending. With online and mobile banking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (e.g. eating out, online shopping, etc.) and instead put that money into savings.
- Look into state and local home-buying programs. Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants. A reputable Mortgage Officer can help you identify programs you might qualify for in your area.
- Celebrate savings milestones. Saving enough for a down payment can feel overwhelming. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If your goal is to save $30,000 total, consider treating yourself to a (frugal) treat for every $5,000 saved. This can help you stay motivated throughout the process.
The views, information, or opinions expressed in this article are solely those of the author and do not necessarily represent the views of Citizens State Bank and its affiliates, and Citizens State Bank is not responsible for and does not verify the accuracy of any information contained in this article or items hyperlinked within. This is for informational purposes and is no way intended to provide legal advice.