You’ve probably saved up for a new car or jewelry, but one of the most important things you can do to improve your financial situation is save for a down payment on a home. It can be hard to set aside a large amount of money for a down payment, especially if you’re a first-time homebuyer. However, following these simple strategies can easily hit your target.
Automate Savings
One of the most critical factors you can consider when setting aside a large amount of money for a down payment is automating your savings. This can be done through several different methods, such as direct deposits and recurring transfers.
Minimize Spending
Before you start saving for a home, you must have a good understanding of your current budget. This will allow you to make adjustments and reduce your spending temporarily. For instance, you can stop buying new clothes for a couple of months.
Increase Income
One of the best ways to increase your savings is by increasing your cash flow. If you feel confident about your current job performance, ask your supervisor about possible promotions or negotiations for a raise. After receiving a raise, direct the new money to your savings.
Another effective way to boost your income is by working a side job. This can be in the gig economy, or it can be in the form of a small business, such as selling products on an online retailer, Etsy. You can also work at a restaurant or shop part-time.
Eliminate High-Interest Debt
Getting into debt can make it hard to set aside a large amount of money for a down payment. One of the most powerful ways to reduce debt is by getting rid of high-interest debt. Refinancing your loans can lower both your interest rate and monthly payments and free up cash in your monthly budget.
Research Assistance Programs
First-time homebuyers can take advantage of various national and local programs that provide down payment assistance. For instance, through the HomeReady Mortgage program of Fannie Mae, you can make a down payment of only 3%.
Consider Retirement Funds
If you’re contributing a large chunk of your income to your retirement accounts, you may want to redirect some of it to your home savings. First-time homebuyers can take out an IRA for a down payment of up to $10,000 without penalty. Before doing this, make sure that a tax professional reviews the details.