If you’re looking to buy a new home, one of the hardest parts of preparing to make this purchase is coming up with your down payment. Depending on what your finances look like now and the price of the home you’re looking to buy, you might be needing to save tens of thousands of dollars, which isn’t always easy.
If this is the situation you’re finding yourself in, here are three tips to help make it easier to save for a down payment on a home.
Set A Goal
Before you can start effectively saving for the down payment for your new home, you first have to figure out your financial goals. Saving with no real goal or end in sight is much more difficult than working toward something you can see and realize.
According to DaveRamsey.com, you should try to save at least 10 percent of the total price for the home as your down payment. Ideally, 20 percent or more would be even better, as this would allow you to avoid having to pay private mortgage insurance as part of the monthly payment on your loan. Once you know what number between 10 and 20 percent that you’ll be shooting for, you can create a plan for how you’ll reach it.
Practice Working Within A Budget
To leave yourself excess money that you can save each week or month in order to start building up your down payment, you’re likely going to have to learn how to work within a budget. Try to find areas where you can pare down your spending or ways that you can earn a little extra here and there.
Kevin Mercadante, a contributor to Money Under 30, shares that not only will working within a budget help you to save money now, but it will also make it easier for you to create additional savings for things like maintenance and repairs once you are in your new home, as these expenses are often not accounted for when figuring out what you can afford in a new home.
Pick The Right Account To Hold Your Money
While you might want to find some shortcuts so that you can grow your down payment as quickly as possible, it’s not advised that you stick your money into a risky investment or account. According to Jeremy Vohwinkle, a contributor to The Balance, it’s going to be much better for you to save your money in either a money market account, a CD, or just a plain old savings account.
Although you won’t be making a ton of interest on the money in these accounts, your money will be safer from risk.
If you’re looking for ways to make saving for a down payment simpler, consider using the tips mentioned above to help you with this.