Down Payment Savings Tips
6 July 2016
Buying a home is typically the largest single purchase a person will make in his or her lifetime. When you are preparing to make a big purchase in real estate, it is important to understand what you can afford, what everything will cost, and how to prepare for your purchase.
In general, it is a best practice to put down 20% or more in cash when buying a home; however, coming up with this amount of money can be overwhelming. Here’s what you need to know about saving before you buy.
Create a monthly budget
You build savings by spending less than you earn. Therefore, any financial goals begin and end with your monthly family budget. It’s important to be both honest and realistic about your spending habits out of the gate, and then stick with your fixed plan as much as possible. Electronic bill pay is a great tool here because then your payments take care of themselves.
Assess your spending habits
Look at your bank and credit card statements from the last three months to see where your money is going, then identify areas where you can cut back. For example:
- Adjust cable and internet bills
- Downsize to a smaller, less expensive apartment
- Stop eating out as much
Make savings automatic
Once you have a dedicated savings account, tell your payroll department that you want a fixed amount sent there every payday via direct deposit and the balance sent to your checking account as usual. The savings will happen regularly this way and you won’t even notice as long as you’ve built a good family budget.
Save your tax refund
While it’s tempting to spend this end-of-the-year bonus, think about the long-term goal and put the money toward your down payment instead.
There are also options that allow for lower down payments on your dream home; however, we recommend these saving tips to start growing your funds early.
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