How to Save if You’re Planning to Buy a Home

The biggest thing that stands between most people and the decision to buy a home is the down payment. In a world where most experts recommend putting 20% of the home’s total purchase price down, saving enough to get a set of keys can feel impossible. Fortunately, the secret to home ownership isn’t making millions of dollars or having no additional expenses – it’s just knowing how to save the right way toward your down payment.

6 Tips for Saving to Buy a Home

Whether you’re working toward a fixer-upper or a move-in ready abode for you and your family, these six steps will get you there:

1. Open a Savings Account

If you don’t already have a savings account, now is time to open one. If you do have a savings account, open another. Ideally, you’d like your down payment savings account to be separate from all your other savings accounts. This allows you to see precisely how much you have in the account at any time. Bonus points if you can find an account that offers a high interest rate on your saved funds.

2. Make a Budget

Budgeting is critical to save toward a down payment. If you’ve never made a budget before, use a simple Excel spreadsheet to track your monthly income and expenses. You’ll then want to take a look at how much money is left over each month and how you’re spending it. If you put $300 per month toward going out, for example, you can cut back on that and put those funds toward your home savings, instead.

3. Slash Your Interest Rates

If you have credit cards with high interest rates, you’re wasting money you could be saving on paying down the interest each month. To put an end to this, call your insurance company and ask if they’ll give you a lower rate. If they do, put that money toward your home savings each month.

4. Improve Your Credit

If your credit score is sub-par, now’s the time to work on improving it. The reason for this is that your mortgage rates are directly tied to your credit score. The better your credit, the easier it will be to get a mortgage. Plus your interest rates will be lower. Today, there are dozens of free sites you can use to check your credit score. If it’s lower than about 700, work on taking proactive steps to improve your credit.

5. Put Monetary Gifts Toward Your Savings

The next time you get a holiday bonus, check from a family member on your birthday, or a tax refund, put it right in your down payment savings account. These windfalls can add up to lots of money over short periods of time and can be instrumental in helping you get to that 20%.

6. Stick to It

It can be tempting to splurge or lay off your savings once your account starts looking healthy. Resist this impulse! Every time you draw from your savings account of put money that should be going into it toward something else, you make it more difficult to make your dream of home ownership a reality.

Save Smarter – Buy a Home Faster

The better you are at saving, the faster you’ll be able to buy a home. No matter where you’re at in life, these six money-saving tips can help you pull together a down payment and get into the home of your dreams.