Tips To Save For A Real Estate Down Payment

Abbie Ackerly
February 26, 2021
financial experts

When you have savings in times like this can be a godsend. But, what should a person do when he or she struggles to save money? In the US economy, you can see that saving is a difficult thing for most people – 47% of citizens don’t even have 400 USD to cover a basic emergency, not at all for a down payment.

If you are seeking to purchase a home or score an investment property loan, you need savings. Did you know that the median down payment was circa fifteen percent in 2015? Since the average house prices were about 250,000 USD, house purchasers need to save up 40,000 USD or more in order to purchase a home. Even small down mortgages such as a Federal Housing Administration loan may amount to 3,5 percent along with closing expenses.

So, wondering how to save up for those huge down payments you need in order to buy a house?

1. Make Saving a Priority

Future buyers have to keep their targets and goal in check whenever they go out to buy something. One small stupid purchase may push you away from your target. So keep in mind your value system and prioritize the down payment.

2. Automate It

Make another savings account and call it a “down payment.” Automate deposits from your income account into the account every month. Begin with a lower amount that will jump in value in time. Banks ask for a down payment in order to find out if you are a financially responsible person that can live within their budget.

3. Gamify It

You can motivate yourself to save up for a down payment! Make challenges that you need to fulfill each month and make up other games that will build up your savings in a quicker way. This may mean figuring out how to lower your car insurance, how to get quicker internet service…

4. Save Money You Didn’t Expect to Come Your Way

If any unforeseen income comes your way, save it up! What are we talking about here? Christmas gifts in the form of money, bonuses, inheritance… All of this can snowball quicker than you think.

5. Create a Side-Business

Strive to enlarge your income with the help of a small enterprise or side-project. A lot of us work forty hours each week, so there is a narrow frame of opportunity to score some extra cash. Scour some freelance websites in order to find some bonus gigs.

6. Budget Wisely

Make the down payment savings already a part of your budget. Begin by deciding what will be your house payment amount for each month, then substract the current rent from that number. This cane easily become a routine and assist in ensuring you can actually afford the mortgage once you purchase the house.

7. Increase Your Revenue

When you find a side job, try upping the freelance rate after a while. Then, ask for the repayment of loans you’ve made. If you make it clear to people that your future house depends on it, they’re quicker to pay you back.

8. Get a Roommate

Rather than living alone, find a roommate to split the bill with. This may help you save up to five hundred bucks a month!

9. Maximize Earnings on Your Stuff

If you have an empty room sitting idly, think about renting it via Airbnb and similar services. If you got some useless things sitting around the home, think about selling the over the Internet. Heck, sell your car and use a bike or public transport.

10. Rent Something Cheaper

This advice is similar to the one referring to roommates – think about finding a shabbier, cheaper place to crash for a year or two before being able to save up for your dream home.

11. Think in Long-Term

Don’t think about short-term expenses like dining out and similar costs – bear in mind your long-term goal in order not to stray of the path that leads to your dream home. As we’ve said, put money in a separate savings account in order to remind yourself of the goal.

12. Out of View, Out of Mind

Try to minimize access to those funds that you’re saving up. Make that savings account less visible. There is a good reason why one needs to break a piggy-bank in order to get to the cash hidden inside!

13. Pay Off Debt in Order to Maximize Savings

Strive to make large payments in order to get out of your debt. Only then can you start saving up properly. Some people save up the money they need this way in only three years!

14. Be a Realist

Don’t turn to TV shows in order to plan your savings and down payment rate. It’s just not realistic. You will just get house envy due to improbable situations.

15. Utilize Extra Income from Work

Remember when we said to set aside that extra unexpected income? Well, diving deeper into it, we suggest you take that bonus you get at work and put it aside. Unexpected or not, calculate it into your savings account. If you get a raise, use all the extra cash to put it aside. You’ll thank us later.

16. Use Investment Real Estate Partners

If you like investing into properties, utilize private lenders as partners in order to finance down payments. Seek out a good deal, put up the money and split the gains.

17. Remain Concentrated

This is an effort that takes time. It takes years. So keep your focus on the target at all times. When you go out to buy something, picture your dream home in front of you in order to stop yourself from spending needless money.

18. Look Beyond the Down Payment

You know what’s even more important than the future down payment? The interest rate you need to pay during the life if your mortgage. What affects this rate? Well, your credit score. And this can make all the difference. So check your credit score before you begin saving up, in order to ensure all the info there is accurate. Give yourself time to improve that score if needed before you begin trading up.

19. Mastering Your Credit

Credit cards will aid you immensely as you move towards owning a home. Sure, mastering them can be a bit difficult, but they can also assist in getting a smaller interest rate, getting approval for bigger credit restrictions, better rewards and insurance rates.

In Conclusion

So, if your target is to buy a house or investment asset, it’s time to start saving for that down payment. Utilize this advice to begin working on your savings today.

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