Planning your build
Saving For A Home Down Payment – Hints & Tips to Help You Save
Saving for a home down payment: what does it really take? Forget the quips about cutting back on coffee – we’ll show you how to get ahead and make your American dream a reality.
So, how much do you need for an average home down payment?
The best way to find out how much is to check in with mortgage lenders. They’ll advise you on minimum deposits, your purchasing power, and other factors like mortgage insurance. Typically, the lowest down payment is 3% of the purchase price which is $15,000 on a $500,000 purchase. You should also start investigating the sort of location and home you’re after so you get a realistic picture of the market.
Additionally, check your eligibility for down payment assistance, first home buyer programs and grants which can assist with quickening your savings timeline. For example, the ‘American Dream’ scheme from U.S. Bank offers consumers with limited resources the ability to become homeowners.
How long does it take to save for a home down payment?
In terms of how long it takes, everyone is different but recent research puts the average time to save for a 20% home down payment at 6 and a half years. You can also utilize resources such as a savings goal calculator to determine a realistic timeline for you to achieve your home down payment goals.
Once you know where you want to get to, the next question is how to get there. As the saying goes, “if you fail to plan, you are planning to fail.”
There’s no getting around it: you’re going to need a plan.
A 5-Step Plan for Your Home Down Payment:
These are big dollars you need to save and that means looking at your financial future from all angles. You’ll need to:
- Double down on debt
- Track your spending and create a budget
- Snip and save
- Earn more money
- Create healthy habits
1. Double down on debt:
If you’re carrying historic debts, now is the time to consolidate them, then clear them to avoid paying extra interest. Take care of this first before you start saving.
2. Track your spending and create a budget:
“You can’t manage what you can’t measure”. Successful saving is made much easier when you know your budget and can see where you’re spending. The good news? There is a huge array of apps to help you do this.
3. Snip and save:
It’s time to take a long look at your lifestyle and work out what you’re prepared to sacrifice to get ahead. Big ticket items include renting out a room, moving back home, downsizing your car or getting rid of it all together and taking local holidays. Smaller ticket items? Eating and drinking at home rather than dining out, buying in bulk and at cheaper chains, and reducing recurring fees like gyms and media services.
4. Earn more money:
It’s not all about your current paycheck. Get creative and think about how you can bring more money in to boost your savings. First things first, focus on your current career.
Can you apply for a promotion, ask for a raise or even change jobs (if it makes sense given your situation)? Or are there other opportunities out there? Can you use your skills to take on freelancing work, or take a second job? With platforms like Uber, Upwork and Task Rabbitr, you can easily turn your side income on and off as it suits. If you’re comfortable, you can also look into making investments if it fits your saving timeline.
5. Create healthy habits:
The #1 tip here is to pay yourself first. Automatically transfer savings to a high interest account when your pay comes in and decrease the chance that you’ll overspend. Other handy hints: if you’ve got a credit card habit, learn to live without them, limit impulse spending and shopping-as-entertainment, and become more mindful of both your savings goal and spending decisions.
The new home advantage
One aspect of your savings journey is deciding whether to build a new home vs purchase an existing one. There are a number of advantages to building:
- Lower repairs, maintenance and running costs, particularly if you build with sustainability in mind
- The chance to create a home that suits your needs perfectly
- Financial incentives, such as access in some states to grants for building new homes
The best way to save for a home down payment can vary, depending on spending habits but there are various benefits to each of the tips provided above.
Increases your power to borrow: The more frequently you save towards your first home down payment, the less risk you represent to a lender. The more you save, the more you borrow.
More choice: Making consistent savings down payments enables you to access a wider range of loans, as more borrowing power grants you access to more lenders’ products.
Access special rates and deals: Consistent home savings down payments may attract high loan qualifications with low-interest rates that save you more money.
If you want to start saving for a home down payment, talk to your local, friendly G.J. Gardner Homes Design Center first. They’ll give you useful advice to get you started and help you decide whether building a new home is right for you.