10 Money Saving Tips for Down Payment on a New Home
Buying a new home requires a tremendous amount of forethought and planning, not to mention good savings and credit. Having enough money for a down payment is a crucial step in the home buying process. Here are several tips to ensure you have enough for a down payment so that you and your family can start searching for your dream home.
Open savings account
This may seem obvious, but it’s an important first step. If you want to save money, you have got to have somewhere to put it. For convenience, open a savings account at the same bank or credit union so that you can easily transfer funds and keep track of all of your funds.
This is one of the hardest for people to not only start but also maintain. Despite its importance, no one likes to limit themselves or take on that extra self-responsibility. There are several ways to start a budget, but the easiest is to start with a spreadsheet tracking all of your income. Next, subtract your expected monthly expense, such as rent, utilities, credit card bills, car payments, and student loans. Then, with whatever money is leftover, plan to spend and save it responsibly.
From this, decide what costs can be reduced or completely cut. A bit of forewarning though, budgeting is difficult, time-consuming, and stressful, but ultimately rewarding. Just remember, to generate significant savings, you have to be firm, responsible, self-accountable.
Reduce your monthly spending
Check interest rates
Everything has an interest rate and all of them are different–credit cards, auto loans, student loans. Examine your accounts and monthly statements, if you are good standing, it may be possible to negotiate your terms down a bit.
Monitor your credit score
Both your ability to borrow and the rate you pay on those loans are very closely tied to your credit score. Your credit score is calculated based on standing in the various credit reports, which monitor your credit accounts, total debt, borrowing history, any missed or late payments, and other factors.
According to the Federal Trade Commission, approximately 20% of all credit reports have errors. Even worse, one report in every 250 has enough errors to lower a borrower’s score at least 100 points. That is more than enough reasons to convince you to regularly monitor your credit score.
Saving money is a hard habit you have to force yourself to do. So, why not make it easy–and automated. Automation takes a portion from your paycheck and automatically deposits into your savings account. Usually, you can choose between a fixed amount or a percentage–either way, saving money just got easier.
Put all bonuses, raises, tax refunds, gifts, and extra income into savings
Extra money is always nice, and it’s great to spend on fun things. But comparing the long-term benefits to the short-term thrills, wouldn’t you rather be moving forward with your life in a new home?
Pay something off, then put that money into savings
Same goes for paying off debt. Paying off a loan is like finally ridding yourself of a heavy albatross around your neck. Let’s say you’ve just made your final $500 monthly car payment. You’ve shown you can survive month-to-month without that extra money, so why not put it in savings?
Earn extra cash with a side hustle, garage sale, and more
There are lots of ways to earn extra money, some more lucrative than others. Freelancing is a great way to add additional income, as is any type of part-time jobs, like waiting tables, bartending, tutoring, and nannying. You can also raise extra money with a garage sale or by selling your unneeded items online.
You are allowed you to access up to $10,000 from your traditional or Roth IRA to buy or build your first home without having to pay the customary 10% early withdrawal penalty. This is, obviously, a great place tap into available funds, but there are significant downsides to doing this. First and foremost, this would set you back significantly in your retirement savings progress. Second, you will also have to pay state and federal on any of these funds that were not previously taxed. So, think long and hard before this choosing this option–it should really only be a last option.
At Stanley Martin Homes, we are committed to helping you save money to buy your dream home. Our lending partners work to find the right financing package for your specific financial situation and educate you on all of the costs associated with buying a home, including the down payment