Successful Ways to Save for a Down Payment.
I get it. The thought of saving 20% of the cost of a home for a downpayment can be terrifying! But I have great news. In MOST instances, you don't NEED 20% down, and a lot of financial advisors would actually advise AGAINST it, because you can make a better return on your money from other sources.
A more realistic number would be 3-5% for your downpayment and 1-3% for closing costs.
Now you might be saying, "That sounds better, but I still live paycheck to paycheck and my rent is killing me. How am I ever going to save that much money?!" And I'm not going to lie, saving for a down payment can be a daunting task, especially if you are already struggling to make ends meet.
But with some discipline and smart budgeting, you can make it happen. I'm going to highlight some of my favorite practical tips on how my family likes to save so you can take that first step towards homeownership.
Create a budget
There is nothing bad about sticking to a budget and it's absolutely possible to make one without it feeling like you are constantly in hand cuffs. The best way to start is to track your spending. This will give you a realistic idea as to where your money is going and where you can make cuts. You would be shocked at how easy it is to overspend on eating out or groceries when you aren't paying attention.
After you have determined where your money is going, take a look and see if there are any areas you can cut back. Can you make your coffee at home? Are there streaming services you didn't realize you were paying for? Maybe shopping at second hand shops is something you have been interested in, but haven’t taken the time. This is not only budget friendly, but GREAT for the environment. Can you eat out less? Skip that extra bag of chips when you are grocery shopping hungry? (Chips are getting expensive!!)
One of my favorite ways to cut back on groceries is with online ordering. When I see everything in my cart and what my total is, it is easier to see if I really need everything in there or if there are some things that I can leave on the shelf without making myself miserable. (I REALLY like food!) And since you are online, there isn't that stigma of having to put something back with people watching.
My family really liked The Budget Mom, but there are tons of budget resources out there. What I like about her methods, is they don’t make you feel restricted and it’s not super cult-like like some of the other gurus. She makes you feel empowered to make good decisions with your money and to really understand what you are doing and why. There is a lot of flexibility in her program and she offers tons of free resources so that budgeting doesn’t become a drain on your…budget.
Rebate Apps
Another great way to save some money is rebate apps. I use Rakuten, iBotta and Fetch to save money and get gift cards for things that I need. (If you want to get started on any of these and want some free money to start, let me know and I can send you a referral code!)
You can also use forced savings. Most banks have an option where you can set up an automated savings transfer every week. If your bank doesn’t, there are apps like Opportune (formerly Digit) or Acorns that can set it up for you and even invest the money so you are possibly getting a better return. If the money isn’t in the account you usually use to spend, then you won’t spend it!
Is there any way to INCREASE your income?
I always see this one in the lists online from financial bloggers and I'm like "yeah sure, let me just write myself a raise!" But do you have some free time on your hands? With the new work from home economy, there are tons of side-hustles you could look into if getting a higher paying job isn't an easy task. You could sign up on Fiver or WeWork if you are good at administrative work.
When I was new to real estate and needed some extra cash, I worked as a freelance merchandiser for several locale retailers. You could grab a few extra hours a week in retail, or food and beverage.
You may want to confer with a lender before switching jobs or industries, as that can inhibit your ability to get a loan, even if it is for a higher paying gig!
Do You Have Savings That You Haven’t Thought About?
This may sound silly, like, if I had an account full of cash, I would have thought about it! But what about a 401k? I know before someone mentioned it to me, I didn’t realize I could take a loan from my 401k without incurring any early withdrawal penalties and it would get paid back through payroll deductions so I didn’t even notice it coming out. You pay a low amount of interest on the loan, but TO YOURSELF to make up for the returns you may make in the market if that money were still in your account. There are specific rules depending on your employer or your account, so make sure you ask your HR representative or the administrator of the account, but a 401k loan can be a great way to make a downpayment on a home that you may not have thought of, since it is generally thought of as hands off.
I hope some of these ideas helped you to not be so scared of coming up with your down payment. If owning a home is part of the future you see for yourself, let’s talk. I can suggest a lender who can walk you through exactly where you are and if you aren’t ready, they can give you a detailed plan with no judgement and a realistic timeline to get where you need to be. I will be there when you are ready with no pressure!
If you have found yourself searching for the best real estate agent near me, then you have found one at a top real estate company in Cincinnati. At TREO Realtors® we take our commitment to helping everyone own a home of their own seriously and will guide you each step of the way to make sure you feel educated and empowered to make the best choices for you and your family.
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