1. Determine What You Need
The first step towards saving for a down payment is assessing what you have and what you need. Prospective buyers should search for a home with a listed price of no more than 5x their annual household income.
Say you’re looking for a home around $250,000. If you want to put in a 20% down payment, you’ll need to save $50,000. Obviously, if you only want to put in a 10% down payment, you will just need $25,000. Buyers have to look at their finances and work with their agent to determine how much they should put into a down payment.
2. Pay Off Your Credit Cards
It may seem counter-productive to pay off credit cards if you’re trying to save money, but it works wonders in the long run. Interest on credit cards is a long-lasting burden that only gets worse over time thanks to interest. If you can pay off your credit card debt as soon as possible, starting with the highest interest payments first, you will be able to save money a lot more easily in the future.
3. Divert Your Retirement Fund
This option isn’t for everyone, but it can definitely help in saving for a down payment. Try to avoid directly taking money out of your down payment, as this can end up doing more harm than good. Rather, take the money you would normally put into a retirement fund every month, and instead put it towards a down payment. Of course, resume putting money into retirement once you are able to make that down payment.
4. Ask Around
Ask your close friends and relatives if they might have any money to spare in order to help you buy a home. Since it’s a gift, it won’t be taxed as long as the amount is under $15,000.
Another person to ask could be your boss. If you feel you deserve it, request a raise!
5. Get A Second Job
This one is pretty straightforward. If you have the time, there are plenty of side hustles to go for in order to make a quick extra buck or two. Driving for a ride sharing service, delivering food, or bartending in the evenings are all great ways to increase cash flow. Another option would be to start making money from a hobby. Perhaps if you’re into graphic design you could start doing freelance work, or maybe if you like sewing, start selling your creations online.
If you don’t think a whole new job is right for you, start working overtime or picking up more shifts at your current job.
6. Sell Some Unneeded Junk
If you or your loved ones have a bunch of unnecessary stuff lying around, sell it! Having a yard sale or selling things online can easily bring in a few hundred or even a few thousand dollars depending on how much you have.
7. Reduce Daily Expenses
Many people don’t consider how the little things in day-to-day life can really add up in terms of cost. Reduce your short term expenses by:
- Cutting down on grocery expenses by either buying less or choosing cheaper options
- Vacationing and/or going out less
- Working out at home rather than paying for a gym membership
- Avoiding buying new things/replacing stuff that doesn’t really need to be replaced
- Keeping the lights off for as far into the evening as possible
8. Apply For Down Payment Assistance Programs
There are plenty of programs out there that exist to help first-time home buyers save for a down payment. Your state’s Housing Finance Agency along with local nonprofit organizations could be a way for you to get money to put towards a down payment.