It's easy to dream about buying a house. It is much harder to save up for your house down payment.
For most Americans, buying a house means coming up with a substantial down payment. LendingTree data showed that average down payments increased in the final quarter of 2014 to 17.59 percent, up from 16.01 percent the previous quarter. In dollars, the average down payment amount also increased year-over-year to $47,585.
That's a ton of money! However, you do have options. Many applicants qualify for first-time buyer programs or FHA home loans, which reduce the required down payment to three or 3.5 percent. The National Association of Realtors (NAR) says that in 2014, "The typical first-time buyer purchased a 1,570 square-foot home costing $169,000." For a typical starter home, then, the three percent down payment required for Fannie Mae's My Community Mortgage program comes to $5,070.
That's a more manageable amount, and with these tips you should be able to get a respectable down payment together in months, not years.
Money Saving Tips for Down Payment
Here are four saving tips that can put thousands of dollars in your home purchase fund.
1. Save $1,000 on Cable
According to Consumers Union (the company that publishes Consumer Reports), cable rates have increased 30 percent over the past five years. Forbes reports that in 2011, just the television portion of a cable bill alone was $78 per month. Rounding up, that is just shy of $1,000 a year.
Canceling your cable can get you about one fifth of the way to your down payment. One survey of 2,000 TV viewers found that about 12 percent of people under 35 said they get all of their TV and movie programming online, without any paid broadcast or cable TV programming.
Saving Trick #1: Streaming services cost a fraction of the price of cable. If you live in or near a major metropolitan area, you can still get your broadcast channels with the help of a simple antenna.
2. Save $600 on Your Phone
It's time to cut the landline. Unless you have truly no cell phone coverage, it is silly to pay for a second phone at your house. What will it save you? Roughly $20 a month for basic calling, $50 if you are on an unlimited calling plan. That's up to $600 per year.
While you are downsizing your calling plans, take a cold, hard look at your family's cell phone and data usage. Your teens, for instance, do not need you to finance their iPhone bills or comprehensive data plans. Shop around for the least expensive plan possible.
Saving Trick #2: Who cares about the newest iPhone? Not you--if you are trying to buy a house, that is. Keep your cell phone until it actually stops working. Then, when it is time for a new one, find a plan that offers a free phone as part of the deal.
3. Save $2,000 on Lunch
According to the USDA, American households spend 43 percent of their food dollars on restaurants or prepared food. A 2012 survey by Accounting Principles points to lunch as a main culprit. Two thirds of American workers buy lunch out instead of bringing it from home, resulting in a whopping $37 a week average or nearly $2,000 a year. A figure like that certainly makes homemade lunch seem much more appetizing.
Saving Trick #3: Double your nightly dinner recipes, then divide the leftovers into individually sized storage containers. This makes bringing lunch from home easier and, often, more delicious than trying to pack a sandwich during the morning rush out the door.
4. Save $1,000 on Coffee
Half of American workers spend $20 a week on coffee. That means you are pouring $1,000 a year down your throat. For comparison, one bag of coffee beans costs under $10 and can yield around 60 cups of coffee.
Saving Trick #4: Can't live without your latte? Make one at home with your own milk frother. They are relatively inexpensive ($10-$20). For that true cafe sweetness, just add a tablespoon of real maple syrup to your drink.
Save Big By Thinking Small
These four tweaks could save you $4,600 in a year – practically your whole down payment. It's not that the individual expenses here are so large, rather that consistently spending small amounts over time can really add up. On the other side of the coin, small savings do add up. Here are a few small tricks for trimming your spending, to get yourself the rest of the way to that $5,070 down payment.
- Curb your impulse shopping: Train yourself out of making impulse purchases -- from gum at the checkout line to a t-shirt at a baseball game. One of the best ways to do this is to limit the amount of cash you have on hand. It's easy to talk yourself into spending an extra five dollars here or there if it's burning a hole in your pocket.
- Kick-start savings with a garage sale: Grab anything you no longer need / use and sell it – eBay, Craigslist, whatever. Deposit a nice chunk into your house fund to get things going.
- Make a list, check it twice: Before you go to the store -- for groceries or shoes -- have a clear idea of what you need and what you can spend. Stick to it.
- Avoid the urge to splurge: Sticking to a budget can be as hard as sticking to a diet. This is a good argument for allowing yourself little indulgences from time to time. Just be sure your indulgences are small, meaningful, and rare. You can't afford for one purchase to wipe out all your spending gains for the month.
- Make saving automatic: Set up an automatic deposit from your paycheck to your savings account, even if it's just 50 dollars a month. You can always add more, and socking away even a small portion of your earnings every month will keep you on track. Alternatively, set yourself a savings goal for the next year, divide by 12 and set up an automatic monthly deposit for that amount.
At first, the amount in your savings might seem pitifully small. But stick with the plan, watch your savings grow, and before long you'll be shopping for your first house.