You’re thinking about buying a house someday soon, but you aren’t anywhere near your savings goals. That’s A-okay – let’s start with the basics of saving for a down payment!

 

  1. Create a timeline and budget

    You’ll want to start with determining how much you’ll need for a down payment. Look into what houses you can afford and calculate what your down payment will need to be. After you’ve got the general idea, go from there and create a budget of how much you can set aside each month and how long it will take to save what you’ll need for the down payment.

 

  1. Put your money into an account where it will grow

    This can be either a high-yield savings account, a money market account, or a certificate of deposit (CD). While the returns and terms vary between each of these, it’s a good idea to put your money somewhere where it has the ability to grow in some capacity (even if just a little) if you plan to be saving for any significant amount of time.

 

  1. Shop around for quotes on different expenses

    Make sure you are getting the most bang for your buck by checking different rates for things like car insurance and your cell phone bill. There are always deals and promotions going on that you may have access to and just don’t know about. So at the very least, ask your current providers if there is anything available to you that you aren’t currently taking advantage of!

 

  1. Set up automatic savings

    It’s fair to assume that if you’re saving for a down payment, you’ll be making frequent, consistent deposits into your savings account. Why not make it easier on yourself and set up automatic deposits into that account? You can ask if your employer could transfer a percentage of your paycheck into the account when you get paid. This not only makes it easier on you, but also ensures that you aren’t skimping out on your savings goals.

 

  1. Monitor your spending

    This is not the time to let your spending get out of hand. While you have a specific savings plan, it’s important to know where your money is going and to stick to the budget. Don’t get us wrong – it’s okay to treat yourself! Just don’t let it get out of hand to where you start missing those savings milestones.

 

How long you need to save for a down payment depends on factors like where you live and what your long-term savings goals are. If owning a home sooner is more important to you than a large down payment, you may take a higher interest rate in exchange. Check out this article from Fannie Mae to learn more about planning out your down payment.

You’ll also want to consider other costs that come with buying a home. Closing costs (which can range anywhere from 2-5% of your mortgage’s principal amount), maintenance, moving expenses, and emergencies are all things you’ll need to have money for in addition to a down payment.

While down payments can be a significant expense, there are approaches you can implement to help get you to your goal of homeownership. Remember that everyone’s homeownership journey looks different and that you can reach your goals with a little time and strategic planning.

What’s next? Take a look at our guide to avoiding mistakes first-time homebuyers making when buying their first home. Happy home buying!