Buying your first home can be an exciting, but busy process.
Aside from dealing with realtors, understanding the industry lingo, and trying not to get too emotionally attached to a property before your offer is accepted, you should first make sure your finances are together.
Two of the most important things to consider before you even start looking at homes include:
- how much you are looking to finance
- and how much you will put down as a down payment.
When it comes to the down payment, more is always better.
If you’re looking to avoid private mortgage insurance, you should consider putting at least 20% down.
Depending on your price range, your ideal home may require anywhere from a $20,000-40,000+ down payment (assuming you want to put down 20%). How can you come up with that type of money without waiting several years?
Here are 5 things you can do to save more money to buy your first home.
1. Get a Second Job
This is one of the most common ways to increase your income. If you’re already working full-time and saving, see if you can get a second job somewhere or start a side hustle to bring in more income.
Before I started side hustling, my income was okay, but earning extra money on the side allowed me to do more with my money and not feel like I was on such a tight budget.
If you are thinking of purchasing a home with a spouse or partner, see if both of you can work extra jobs or side hustles as long as you are up for it. While you may not be able to keep that up for long, the more streams of income you have coming in, the better.
It’s best to use the double side hustle (or second job) approach when you don’t have kids or any additional responsibilities because you will get very busy.
You can still make it possible with kids as long as your extra work is flexible, but realize that the more you work, the more likely something will have to be sacrificed.
2. Cut a Major Expense
Speaking of sacrifices, another way to put more money toward saving for a home without having to put in a ton of extra work is to cut a major expenses out of your budget.
You can do this temporarily or permanently. If there’s something that you’re spending money on that you know you could do without, consider letting it go and delaying your gratification for the sake of owning a home, if that is your main goal.
You may even want to downsize your living expenses drastically. The thought of moving back in with relatives has crossed my mind when my husband and I talk about wanting to afford buying a home in the future.
My mom lives close to my current apartment and has a spare room, so I know that we could pay her a small rent payment each month (about one-fourth of what we pay now) and put our items into storage for a few months if we really wanted to accelerate our savings contributions and buy a house in the near future.
Sure we’d be giving up a lot of personal space, but it would definitely only be temporary and it would help us get ahead quicker.Overwhelmed by saving enough money for a down payment on a house? These tips will help Click To Tweet
3. Look Into Home Buyer’s Assistance
There are quite a few home buyer’s assistance programs available all over the country to help first time home buyers. These programs are not loans, meaning the recipients don’t have to pay the funds back.
They are often funded by the government and vary state-to-state, but some offer grants that can help go toward your down payment and others provide funds to help you cover closing costs or both.
There is usually income limitations to qualify for these programs and eligibility also depends on your family’s household size. One thing I like about these assistance programs is that you don’t have to be dirt poor to qualify.
The government understands that there are a lot of hard working Americans out there who dream of homeownership, but need a little help getting there. In my home state, there is a program that helps provide 3% down payment assistance, and a household of three with an income of less than $90,000 annually usually qualifies.
If your income meets the requirements, you should at least look into these assistance programs.
4. Withhold More From Your Paycheck
If you want to save more, but you’re having a hard time being disciplined, see if you can ask your employer to withhold more income from your paychecks. That way, you’ll prioritize saving up for a home over other expenses automatically.
I know most people advise against getting a large tax refund, but it’s so much easier to make a huge payment on something or a large savings contribution when you receive a lump sum of money.
If you’re one to put saving off or just tend to have a lot of unexpected expenses, you can change your withholding exemptions to “0” on your W-4 which will cause the IRS to withhold more of your paycheck and give you a larger tax return.
While consistently saving in a high-yield savings account is the best option because it allows your money to earn interest, if you only have a few thousand, the interest you earn may only be a couple of dollars.
5. Use Gift Money Wisely
If you receive gift money for birthdays, holidays, or special events, try to throw that money directly into your home down payment savings account. You can even go so far as to sell gift cards you receive for cash if you are interested in boosting your savings this way.
While gift money is not always a guarantee, it can help speed up your goal and you can even mention to family that any monetary gifts they supply you with will go straight to saving for a home. This may motivate friends and family who can’t help as much in a traditional sense still support your dream of homeownership.
In addition to gifts, you can also stash away bonuses from your job to increase your savings amount.
When it comes to saving for a down payment on a home, try not to get too overwhelmed with your goal. Lower your expenses, seek out extra streams of income, and look out for any and every way to save extra money that comes your way.
Do you own a home? How did you save up for a down payment? How much did you save?