Tips on How to Save for a Down Payment on a House

If you are thinking of purchasing your first home in northern MN you are going to need a down payment. While it’s common for those who have saved and saved to put down 20%, some lenders now allow a smaller amount, and many first-time home buyer programs may go as low as 3% (remember to shop around when it comes to getting a mortgage). While a smaller down payment may be exactly what you need to buy your first home, a 5% down payment on a $150,000 home is still $7,500 and may take some time to save.

If saving money sounds like a huge challenge for you, don’t worry, we have some tips on how to start saving. First, come up with a savings plan to determine how much you’ll need to set aside every week or month. Using the $7,500 example from above, if you are planning to purchase a home in 2 years, you’ll need to save $312.50 a month for your down payment.

To do this, start by taking a closer look at your monthly bills and see if there is anything you can cut down on or eliminate — maybe you are paying $50 a month for a gym membership you rarely use, or you pay $40 extra for premium satellite channels that no one watches. These services can be cancelled and the money can go directly into your savings account.

If you eat out multiple times a week start eating out less. On average, a couple of two spends $50 to eat dinner out with drinks and tip.  If you are eating out 3 times a week at an avg. of $50 per dinner, that’s $150 a week or $600 a month.  If you cut your eating out in half, right there you are saving $300 a month.

We know you love your morning coffee from your favorite coffee shop, but maybe consider picking up coffee twice a week instead of every day.  Cutting down to only two days a week can save you close to $100 a month.

When is the last time you shopped around for car insurance rates?  Spend an hour comparing your current policy to other company’s to see if you can save.  Sometimes you can save up to $50 a month for the exact same coverage.

Consider using your tax refund to help build up your savings account for a downpayment.  If you have a $1,500 return each year, that is $3,000 over 2 years that you could put in your savings account bringing the $7,500 example from above down to $4,500.  If you only need to save $4,500 over two years, that is $187.50 a month.

Another great plan while you are saving for your future home is the want vs. need philosophy.  If you are going to buy something, say online, ask yourself do I want this or do I need this?  If the answer is want, skip the purchase and put that money in your saving.  You will be surprised at how fast your savings will add up when you ask yourself this question.

When ready to purchase your home, contact Reed Realty. Our agents are trained experts in their field. We pride ourselves on quality customer service and continuing education. Whether you are a first-time home-buyer or a seasoned veteran, our team has the resources you need to buy real estate in Northern Minnesota.

 

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