Mortgage 101
May 4, 2023

What are the 7 Best Ways to Save for a Down Payment?

Estimated reading time: 3 minutes

When you’re planning to buy a house, a down payment is one of the largest upfront costs. The purpose of a down payment is to allow you to have some equity, or ownership, in the house before you begin paying your mortgage loan. If you’re concerned about how to save for a down payment, don’t fret! We’ve outlined seven tips to help jumpstart your down payment savings.

1. Re-Evaluate and Stick to a Budget

Even if your budget works for you, re-evaluating is a good idea. For example, you may have accumulated more subscriptions than when you first began laying out your budget. If you’re just beginning to budget, begin by tracking every place your money goes for a month. This will ensure a concise look at where your cash is ending up and an easier way to determine where to cut back your spending.

2. Save Automatically

If you’re only depositing money in a checking account, you may be missing out on accumulating interest from a savings account! Automatic deposits are a hassle-free way of ensuring cash like your paycheck or bonuses go straight to your accounts without having to worry about physical deposits. Speak with your company’s payroll department or check with the financial institution where your check is deposited to see if you can split your deposited money between your checking and savings accounts.

3. Reduce Spending Habits

According to a 2022 survey from Circuit, Americans spend an average of $1,843.72 on food delivery annually. Switching to homemade meals that are affordable and tasty will keep cash in your wallet and may even be healthier than delivery services.

If you’re an impulsive or trendy buyer, it’s time to cut back! You can unsubscribe from stores’ marketing emails or hide social media ads if you’re often tempted by deals. Buying things secondhand instead of brand new is not only less expensive but also more environmentally friendly.

4. Pick up Extra Income

Having extra income temporarily is a great solution to help you save for home costs. You can sell unwanted items on Facebook marketplace or in neighborhood garage sales. You may want to pick up a side hustle, like working for a ride share or food delivery service. Another way to save a little extra is by depositing your tax refunds and work bonuses instead of using them.

5. Vacation Differently

If you or your family vacation or travel often, you may want to consider different options until you have enough of a down payment saved. Larger trips can be saved for special occasions, like milestone birthdays or major life events. You may also consider localizing your travel. By taking day trips in your local area, you won’t have to pay for a hotel or other accommodations.

6. Ask for Help

There’s no shame in asking for help! You can ask your relatives and friends to skip physical gifts on holidays, birthdays, or other special occasions in lieu of money. Some loan programs may even allow you to use gift funds toward your down payment, so it’s best to ask your Loan Originator first before depositing monetary gifts.

7. Set a Goal

Adult daughter being hugged excitedly by her mother in front of a laptop computer.

This one may seem obvious, but setting specific goals motivates you to reach them! Different loan programs have different down payment requirements. Using a home affordability calculator will give you an estimated breakdown of how much home you can afford and what your monthly payments may look like. When you’re ready to learn more about home financing, contact us! Our knowledgeable Loan Originators are here to support you along your mortgage journey to help your home financing dreams come true.

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