From 2001 to 2015 median rent increased by a whopping 32%, and it has only risen higher by now. So you’re likely sick of throwing money away every month on that ever-increasing rent. But the difficult part of buying a house is coming up with that big down payment. You also want to own a house before you’re too old to enjoy it, and socking away a little bit every month (as you do for retirement) just won’t cut it. So here are 10 ways to save for a down payment for your Floresville house.
1. Determine How and How Much You Should Save
In order to save for a down payment for your Floresville house, you absolutely must begin by determining how much you need to save and what your savings strategy will be. Most financial experts recommend that you consult with a mortgage lender to determine exactly how much and what kind of mortgage you can actually qualify for. This will determine, in large part, how large a down payment you’ll need to save for. It gives you a starting point. Plus a lender knows of the special programs such as city down payment assistance programs and USDA programs in rural areas that you might be eligible to use.
The current lending market is pretty tight, so it would wise to count on saving up a down payment of 3.5% to 20% of the purchase price. That’s a good chunk of change, but the more you put down, the better deal you can usually get. Then, you just have to determine your savings strategy and attack it with determination. Plus again your lender will advise you of your best option. Most of the loans in the San Antonio area and South Texas are either the 3.5% down or the USDA zero down payment programs.
2. Figure Out Your Savings Time Frame
The next step on your journey to save for a down payment for your Floresville house involves figuring out your savings time frame. The shorter your time frame, the more you will have to save each month and each year. So if, for example, you plan to purchase your house in five years, you just need to divide that 20% down payment by five to figure out how much you’ll need to save each year. And realize that if house prices increase you will need a bit more so it is a good idea to pad that figure. But the other side of the coin is that you were be earning more in five years time.
3. Determine the Best Way to Save for a Down Payment (for You)
Because each person’s situation is unique, you will also need to determine the best way to save for a down payment that best fits your needs and financial circumstances. You’ve already figured out how much you need to save and your time frame, so next is determining how to go about it. Financial experts generally recommend here, because you are saving for a definite, relatively short-term purpose, that you avoid risky investment vehicles such as stocks and investment trusts. They suggest, rather, using extremely low-risk vehicles like savings accounts, money markets and CDs. Still, depending on your situation, a combination or a hybrid model may work better. Another option may be your company’s retirement plans. Putting money into your retirement plan may be a higher rate of return especially if your company matches your contributions. Some companies allow you to borrow against your retirement plans or withdraw money for a home purchase. That is another avenue to explore.
4. Make Budget Adjustments
Saving for a down payment definitely means making some budget adjustments – figuring out exactly where you can make some cuts and where you can’t. Your goal is to save in the thousands per year, so you will have to make some adjustments somewhere in your budget. If you can make only minimal cuts, then you may have to find ways to inject additional income into the budget. An absolutely objective assessment is critical if you truly want to achieve your goal of home ownership. You may have to delay that new car or that extra movie night or that expensive coffee in the morning. Making your own coffee makes it worthwhile when you move into that new home.
5. Automate to Save for a Down Payment
To successfully save for a down payment for your Floresville house, you also have to make saving as much a part of your routine as, say, brushing your teeth every day. And a great way to do this is by setting up an automated saving process. Something like an automated payroll savings plan will do the trick. This way money is automatically shifted from your paycheck to your savings – and the temptation to spend that money will be greatly reduced.
6. Cut Expenses… Ruthlessly
Similar to making budget adjustments, cutting expenses will be critical for most people who want to save for a down payment. You will be surprised at the number of expenses you can cut and the hundreds of dollars you can save each month. Here are some of the extras that most people can cut:
- Eating out
- Sodas and snacks when you stop for gas
- Gym memberships
- New clothing
- Name brands at the supermarket
- Cable TV
Some these may be quite a sacrifice at first, but it’s a step toward your goal.
7. Bank Your Windfalls
An easy way to save for a down payment is simply to bank any windfalls that come your way. If you get, for example, a small inheritance, an unexpected income tax refund, or a monetary gift, just stick that money in your bank right away. It’s extra money, so you won’t really miss it.
8. Cut Back on Retirement Savings
If you’re young and retirement is many years away, you might also consider reducing the amount of money you contribute to your retirement account or even stopping the practice altogether for a year or two. Then, once you’ve saved up your down payment, you can go back to saving for retirement. Or as above check your company’s guidelines for downpayment money for a home.
9. Do the Side Hustle
Saving for a down payment may also mean making more money, and for most of us, that means a second job or some kind of side hustle. If you’re currently making it on your primary income, then anything you make on the side can go toward that down payment. And it can add up fast.
10. Choose Wisely With an Agent’s Help
Although not exactly a way to save for a down payment for your Floresville house, purchasing wisely is still an aspect of it. After working and sacrificing to come up with that big down payment, you don’t want to wind up making a bad real estate investment – one that may cost you enormously in the long run. And the best way to ensure you purchase wisely is by using an experienced local agent.