6 Ways to Save for a Mortgage Down Payment
When you're eager to say goodbye to landlords and hello to homeownership, it might seem like it will take an eternity to save for a mortgage down payment. But the amount you bring to the closing table can lower your payments and reduce the borrowing cost by shrinking the loan size. Not all savings strategies take years to achieve or require significant budget adjustments or minimal lifestyle changes. Your favored tactics will largely depend on how much and how fast you aim to save.
No matter your timeline, consider using these tips to speed up the time it takes to save for a down payment on your new home.
1. Explore mortgage loan program requirements.
Down payment requirements vary by mortgage program and lender. While a 20% down payment is a common recommendation, the amount required could be less. Many first-time homebuyer programs only require a 3% down payment. Other options include Credit Union of Colorado's 100% Mortgage Package, which removes the need to save for a down payment by financing the entire cost of the home.
Remember: The less you put down, the more you'll need to borrow.
2. Set a savings goal.
Setting aside money for a down payment without a specific savings goal makes it easy to get off track. If you don't have a savings target, it's easy to say yes to unnecessary expenses like a new television or electronic device. Set a goal by using a mortgage calculator to help determine how much your budget can afford. Adjust the home price, down payment, or both until you land on a figure that makes sense for your income.
3. Update your budget.
After identifying a down payment amount, enter a new category in your budget: Down Payment Savings. Next, determine the monthly amount by reviewing your budget and looking for ways to reduce your expenses. The savings that result from trimming monthly costs and limiting frivolous spending should be redirected into a dedicated savings account.
4. Increase your income.
Add to your account by upping your income. Consider working more hours at your current job, earning money with a side hustle, or asking for a raise. Whether the bump in earnings is temporary or permanent, increasing your income is most helpful when you remember to keep your spending in check. Spending more as earnings increase will unnecessarily delay progress in saving for your mortgage down payment.
5. Lower your current housing costs.
Moving back home with your parents or getting a roommate to split the costs at your current home could result in substantial savings in a short time. While these options may not eliminate your current housing costs, they can drastically reduce them — and you can deposit the savings into your down payment account.
6. Sell unwanted belongings.
Decluttering your home and selling items at a garage sale, consignment shop, or online is a simple way to boost your down payment savings. Selling these items also comes with a bonus — you won't have to move them to your new home. That means fewer packing materials, and potentially a smaller moving truck.
Saving for a house takes consistent effort and patience. Stay focused on your mortgage down payment goal and you can secure the keys to your new home sooner than you think. Start by getting pre-qualified for a Credit Union of Colorado low-interest rate home loan. Apply online now!