Homeownership is one of those things that can help people in the long term. With a house you aren’t subject to rising rent costs and you build equity instead of simply putting money into someone else’s pocket each month. With conventional loans often available for down payments as low as 5%, and things like FHA loans have down payments as low as 3.5% for those who qualify. Although saving for a large down payment on a house can feel overwhelming, it is possible, and here are some ways to help.
If your credit score is low due to financial challenges, you’ll need to do some things to repair your credit before you can purchase a home. One of the ways to do this is through a credit builder account. If you’ve paid off bad debts, you can also work with the credit reporting agencies to have those removed from your account. Additionally, paying off or down other debt will improve your overall credit score.
Create a Monthly Budget
If you want to save for something big like a home down payment, you’ll need to create a plan you’re your money. A budget helps people see what they make, what expenses they have, and how much is leftover to save. A flexible budget helps especially if you have variable income and need to plan your essentials first. Once you pay for your needs, you can easily cover things like saving up for a house. You’ll also be able to account for those semi-annual expenses like taxes and car registrations.
Make Saving Fun
Do you like to scrapbook? Make posters? There are a lot of fun ways to save. You can put a picture of your dream home on a board and add something to it each time you hit a savings milestone. If you have a goal to set aside $10,000, you can add something cool to it when you reach each $1,000 milestone. These visual aids can make the process of saving more fun and something you can see regularly.
Use a Saving App
Automating your savings through an app can help you save more money than you’d realize. Many apps simplify the savings process by setting aside the change on your normal transactions. Just by saving pennies each time you buy groceries can add up to big money over time. Additionally, most banks allow you to set up a recurring savings amount. Whenever you get paid, you can automatically have any amount moved over to your savings account. These automatic savings tips will add up over time and help you reach the goal of home ownership much faster.
Pay Down Your Debts
Paying down your debts does two things. First it helps your credit score. It improves your debt to income ratio. This in turn will help you get a better interest rate on a home which can increase your buying power. Second, it reduces your monthly expenses. This leaves more money in your pocket so you can set aside more in your savings account.
Try a Side Hustle
Getting a good side hustle is an excellent way to make more money. Maybe you can try delivering groceries or taxiing people around through Uber, Shipt, or DoorDash. There are also websites like Udemy, Fiverr, and UpWork where you can get gig work for anything from writing to graphic design. A side hustle can help you make faster headway on your financial goals. Some people are even able to make their side hustle a full-time job because it ends up paying them more.
Cut Your Expenses
One of the hardest things for people is to cut things out of their budget. Their wants and needs end up longer than their budgets. If your budget includes a lot of unnecessary expenses like online shopping subscriptions, streaming services, cable, and mail in services, you might want to thin those out. By temporarily living without them, you can save hundreds of dollars per month. Another way to save on your expenses is to renegotiate your insurance and your credit card interest rates. These are just a few ways to add money back to your budget.
Saving up for a home down payment is possible. It’s worth it when you consider that your new home will appreciate in value and give you much needed equity with time.