Saving to get a down payment on a home can be an intimidating process. After all, buying a home is going to be one of the biggest purchases of your life, so you want to make sure to start off on the right foot by saving up a large sum of money first for your down payment. If you want some ideas on how to alter your lifestyle and spending patterns so you can learn how to get a down payment, below are eight ideas.
How to Get a Down Payment for Your Home
Automate Your Savings
If you wait to save your money until the end of the month, you won't have any left. It's just human nature to spend if the money is there. So, the best practice you can pick up when you're saving for a large goal like paying for a house down payment is to automate your savings. Every time you get your paycheck, set your account to automatically transfer a particular amount to savings. It's even better if you can transfer the money to a completely different bank or high yield savings account so it's really, truly out of reach.
Track Your Spending
When you have a big goal in mind like owning a home, the best way to get your finances healthy is to be extremely aware of them. If you get into the habit of writing down everything you spend or tracking it with online software, then you'll know not only how much house you can afford but also your weak spots when it comes to spending so you can make positive changes and save more money over time.
Create a Budget
You can't create a budget without knowing your spending patterns, so track your spending first and then create a spreadsheet with all of your spending categories. Once you can see the total picture of how much money you have coming in and going out, you can see how much you have available to save each month. Then, you can tweak certain categories to try to reduce spending and funnel more into your down payment fund. For example, if you notice you spend $300 on going out to eat every month, try cutting it back to $100 to start with and then put the extra $200 each month into a savings account for your down payment. If you do this in enough categories, you'll be surprised at how quickly you can save.
Downgrade Your Car
According to data from an Experian study, the average American spends nearly $500 a month on their car payment, which is a huge amount of money when you're trying to save a large down payment for a home. The value of your car should be a small percentage of your net worth because it's a depreciating asset. So if you have too much money tied up in your car, consider selling it and getting a less expensive model. This will allow you to increase your savings rate.
Pick Up an Extra Job
No one wants to work 100 hours a week, but remember, this is temporary. You can do a number of extra jobs, preferably ones that pay above minimum wage, like babysitting, dog walking or delivering pizzas at night. You can also join the sharing economy and drive for Uber or Lyft. You could also tutor high school students. Take all of this extra money and put it in your down payment savings account. With hard work and dedication to your side job, you'll be surprised at how much money you can make in a short amount of time.
Ask for a Raise at Work
You don't have to wait until your yearly evaluation to ask for a raise at work. If you keep solid records of your positive contributions to your company and can point to specific examples of why you're an asset they need to keep, you can likely increase your pay regardless of the time of year. If you do score a raise after talking to your boss, keep living as if you were on your pay before the raise and apply all extra cash to your savings fund for your down payment.
Have Fun at Home
Most people spend money on travel, eating out, and other forms of entertainment like going to the movies. When you are saving for a large goal, though, you should try to do more entertaining at home. So, if friends ask you to go out to eat, invite them to a potluck at your house instead. When your sister wants to go to a movie, offer to host a movie night in instead. As long as you tell your friends and family about your goal and explain why you'd rather have fun at home, they should understand that you're trying to save, and more importantly, that it's only temporary.
Ask for Assistance from Family
If you really want to be a homeowner and you've tried to reduce expenses but aren't getting anywhere, you can always ask a family member for a loan to help you get into your first home. This is an absolute last resort though as it can get awkward when you borrow money from family. Not only that, but homeownership can get very expensive when you have to deal with closing costs and repairs. However, it is one way to get a down payment although the other seven ideas on this list are much more preferable.
Ultimately, it is entirely possible for you to learn how to get a down payment on a home. Saving for a down payment is usually the first time in people's lives that they have to save up tens of thousands of dollars, and it's always good to save up at least 20 percent of your home's price to avoid having to pay Private Mortgage Insurance as well. It might seem like a large number and it will be a challenge; however, it's a challenge that's absolutely possible with enough motivation and a continued awareness of your spending and finances.