Owning a home is one of the most universal goals out there. It transcends just about any kind of demographic barrier, and just about everyone in the country can appreciate the benefits of home ownership.
But getting to that white picket fence vision in your head is not always as easy and straightforward as we would like it to be. Oftentimes, the biggest obstacle to home ownership is the dreaded down payment.
For many people, it’s the largest amount of money that they will ever have outside of their retirement savings, so coming up with that down payment can really take some serious commitment.
If you are one of those people dreaming about owning their own home but struggling to come up with a down payment, here are a few tricks and tips that have helped other people in your situation kick start their savings plan.
Automate a Savings Plan
No matter how much you make, it will be difficult to save up for a down payment if you leave the act of saving up to your short-term memory.
You should try to make the entire process automatic.
The easiest way to do this is to set a certain portion of your paycheck to be direct deposited into a separate savings account that you never touch. The less access you have to the account, the better. And the less attention you pay to that account, the faster it will seem like it’s growing.
The $5 Change Plan
Another simple idea that has helped a number of people get their saving plan started is to commit to saving every $5 bill that you receive as change during any transaction.
Wherever you are, if the cashier hands you a $5 bill, that $5 bill goes into the down payment fund. You’ll be amazed at how fast those $5 bills add up!
Raises, Bonuses, and Refunds
When most people receive raises or bonuses, they simply raise their spending habits to match without even thinking about it. You can be smart and do the exact opposite by funneling that extra income straight into your down payment fund. If you’re just starting, this can really get you off on the right foot.
Another annual bonus that many people don’t think about is their income tax return. No matter how much you are getting back this year, it is something that could be contributed to your down payment savings.
Put Off That New Car
If you are coming to the end of the payments on your car, rather than getting a new one you might want to think about sticking it out for a few more years without a payment. Then take the money that you were spending on that car payment and funnel it straight into your down payment fund.
Of course, there is also the possibility that you don’t need as much for your down payment as you think you do. It is well known that you can get an FHA loan with a down payment around 3.5%, but there are also government programs like VA loans and USDA-backed loans that can include 100% financing. If one of those “no down payment” programs fits your situation, you might already have enough to buy!
No matter what your savings goals are, the best way to make sure that you reach them is to have a plan in place and then carefully track your progress towards that goal. Sites like mint.com offer some really helpful tools that can assist you both in setting up the plan and tracking it effortlessly.
Good luck with your saving, and enjoy your new home!