Saving for the Down Payment
During the home buying process, the down payment is always the biggest roadblock. But fortunately, the burden of making a down payment can easily be reduced if you start thinking today about it.
Now home buyers or tenants have multiple options to save for the down payment and the process is getting easier day by day.
Also when a home buyer takes a mortgage, the most critical decision is how much to put down for the down payment. So, how do you plan to save for this? Here are some good ways to save enough money to make a timely down payment.
Transfer some money into your savings account
You might not find this to be a new idea but it is one of the easiest ways to save money for the down payment. All you need to do is to open a savings account and set up an automatic direct deposit in that account. Do this every month consistently and commit that you will not use this money for any purpose other than the down payment.
Reduce the debt by starting with the highest interest rate
When you pay high interest rates on your credit cards, you limit the ability to save. Always pay off the high-interest rate cards. In fact, reduce your debt by starting with the highest interest rate credit card. When the entire balance is paid off, simply close the credit card and pay off the next highest interest rate debt. If it is hard for you to close the credit card then at a minimum, transfer the card balance to a lower interest rate credit card.
Save the tax returns, bonuses and raises
It is always easy to fall into the trap of lifestyle inflation, each time you get a better paying job or a raise you spend more. Thus, rather than upgrading your apartment or car, simply continue to live with a simple lifestyle, at least for a couple years so that you can save the additional money and put it straight into your savings account or invest it.
Every time there is an income raise, increase the amount of money to be transferred into savings. This is one of the easiest ways to save a good amount of money in a short period of time, without taking the burden of penny pinching. Similarly, it is tempting to use the tax return money or yearly bonus on purchases you have been eyeing, but if you can avoid the temptation and put the money into savings, you can achieve your goal a lot earlier than you think.
Break down the savings goal into some daily amount
Let’s assume that you need to save around $30K to buy a house. If you are planning to buy that house in five years time, you must save at least $6,000 every year. This means only $16.5 every day. Also, if you manage to deal with a smaller down payment, you can not only save more but the number becomes a lot more doable. When you know the amount that you must save on a daily basis, it helps to make smarter decisions as to when to spend with a clear mind.