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How to Save Money for a Down Payment on a Home

With the rising cost of renting, you may consider saving up for your own mortgage.

Whether you have been considering the idea of getting a foot on the property ladder or if you check the new home listings daily, you’ll know that buying your own home is a big move. Not only is it a chance to put shelves where you want in a room, but it’s also a great way to get started in the property market. The catch is that you should have enough saved up to afford a sizable down payment on the home of your choice.

Saving up for a down payment to buy your first house can seem pretty daunting, especially if you’ve never had more than a few thousand dollars in the bank at any given time. Setting aside five figures or more may seem impossible – but it’s not! If you go about it the right way, it can be quite simple.

Set a Savings Plan

Once you know how much you need to save, the next step is to figure out how much you can set aside each month. For example, if you plan to save $45,000 for a down payment, setting a time frame of five years to save $45,000 means you’ll need to save about $9,000 per year, or $750 per month, to make it happen.

Look at your total monthly earnings and outgoings so that you can set up a budget – and stick to it! Find out where you’re splurging every month and aim to cut back, whether this means you eat fewer meals in restaurants, cancel your TV subscription, or pause your housecleaning services.

Check Your Credit

Your ability to borrow, and the rate you pay, are closely dependent on your credit score. Lenders may be willing to originate a mortgage for you with a smaller down payment if you have a strong credit score. Based on how much you’ve borrowed, your total debt, and any missing payments, your credit score is a financial snapshot. Get a copy of your report and scan it for errors, correcting any immediately. Even though you are on a tight budget, ensure that you still make debt payments on time every month.

Review Interest Rates

Interest rates on your credit cards, savings accounts, and car loans can fluctuate readily. Go through every bill and account and check the interest rate. If you’ve been making full and prompt credit card payments, call up the credit card company and tell them you want a lower rate. You may get a lower interest rate simply by asking!

When you need help obtaining a smart mortgage, contact Dean Rathbun. We can help you determine the right plan of action for your real estate needs.