The first step in saving for a home down payment is to assess your financial situation. Take a look at your income, debt, and where your money is going each month.
Getting a better idea of where you are financially now will help you figure out the best ways to save a larger down payment, faster. When you have a handle on your current financial situation, consider the following six ways to help you start saving money for a home:
1. Cut out the extras.
Once you’ve assessed where your money is being allocated, you may be able to see areas where you can cut back. Do you have an expansive cable plan but rarely watch TV? Are you paying an annual fee for a gym membership but work out at home? Did you forget to cancel a free introductory offer that you’re now being charged for? All of these small extras can add up, and by eliminating them you can save for a home faster.
2. Dine in instead of eating out.
Speaking of unnecessary expenses, a huge way to save money for a home purchase is by making your own meals rather than going out. All of those morning coffees, delivered lunches, and expensive dinners can add up quickly. Make the most of your money by buying groceries and preparing meals yourself.
A great way to do this is by meal-prepping. Make it a weekly routine to plan meals ahead of time. Set your coffee maker, pack your lunches, and cook dinner at home. You’ll be amazed at how much money this will save you!
3. Pay off or consolidate debt.
If you’re accruing and paying a high interest rate on your current debt, it will undoubtedly affect your ability to save for a down payment on a house.
To maximize your down payment saving potential, begin by planning how and when you will pay off your debt. A good way to start is to pay down the debt that has the highest interest rate first until it has been paid off. Keep in mind, however, that certain debt is better to have than others (for instance, student loan interest is tax-deductible, whereas credit card interest is not).
If paying off debt seems too insurmountable, consider consolidating it. Many credit unions have lower-interest credit cards and may be willing to increase your credit limit if you transfer your outstanding balance from another (higher interest) credit card.
There are also debt consolidation companies that will work with you to negotiate with companies to consolidate all your debt at a fixed interest rate and fixed payment every month.
4. Set up an automatic savings deposit each month.
One way to ensure you’re saving money each month is to set up an automatic deposit into your savings account. You can do this through most online banking systems by setting up a recurring transfer from your checking into your savings on a particular day of the month. Setting aside $300 a month would add $3,600 into your down payment fund per year!
5. Consider a second part-time job.
Depending on your availability, a second part-time job may be a great way to save up extra cash. It doesn’t have to be a conventional job, either. Do you have a special talent you’re not utilizing? Are you experienced in wood working, art, or knitting? You could start an etsy shop and sell your handmade goods, or run a booth at a local craft fair!
6. Look into down payment assistance programs, such as the Oregon Bond Residential Loan Program through Portland Housing Center.
Certain areas (including Portland!) have buyer assistance programs that help you save by matching some of your down payment funds (or giving you a lower interest rate on your home mortgage) if you fall within certain income limits, and take home-buying classes. For more information about this program, check out the website here!
Have more questions? Contact us! We’re always happy to offer tips or advice about saving for your first home!