Top tips to save for a down payment

Nicole Smith Woodard
Published on June 14, 2016

Top tips to save for a down payment

Being a renter does have some advantages. No paying off a mortgage, no property taxes, and the landlord takes care of any maintenance and repair costs. However, renting a home does have one major drawback: You are spending money on rent without gaining any equity on the property. And, if you had purchased in the Dallas/Fort Worth area just 4 years ago, your net worth would have grown by as much as 20% — just by owning a home.

We’re told that many renters may want to own a home, but they struggle to find the cash needed to make a down payment on a property. In fact, a recent survey conducted by the website gobankingrates.com showed that 20% of adults in the U.S. don’t use a savings account, while 33% of those that do have an account have a balance of zero.

Below you will find some top tips to help you start saving enough funds to put a down payment on a home.

Set a target

Knowing how much you can afford to spend on a property is crucial to help you identify how much you will need to save for a down payment. Connect with a quality mortgage lender to find out exactly how much money you’ll need to bring to closing on a home that you can afford.  After working out how much you extra you’ll need to save in order to obtain the home you want, compile a detailed saving plan to reach your target. Having a target goal to reach will help you buckle down and start to put money away.

Work out your spending habits

Go through your credit card and bank statements for the last few months to find out where your money is spent. You can then focus on the areas of spending you can cut back on.

Saving Tip #1: Cut down on your cable bill

The average household bill for cable TV has rocketed in the last 5 years and now stands at nearly $100 a month, up nearly 40% from 2010. Cutting down on your cable bill is a great way to save money every month. If you just can’t bring yourself to cut the cord, you can talk to your cable provider and attempt to lower the bill and shop around for a better deal. Or, consider a much less expensive option like Netflix or AppleTV.

Saving Tip #2: Get rid of your gym membership

Make the outdoors your free gym. Jogging, cycling and hiking are all great exercise and don’t cost a penny.

Saving Tip #3: Downsize your current home

If you currently rent a 3-bedroom apartment, then downgrading to a smaller unit can save you hundreds of dollars a month. A smaller property also means cheaper utility bills.

Saving Tip # 4: Make some income on the side

Due to today’s technological modern world of mobile internet and smart phones, it is easier than it ever has been to make some money from a side job. If you own a car, then you have a huge advantage and can jump straight into work with an opportunity like Uber. Or, consider freelancing your skills on fiverr.com.

Saving Tip #5: Get a high yield savings account

Leaving your “extra money” in a checking account does not earn you any significant interest. Move your funds to a high yield account and get some interest on your savings.

Saving Tip #6: Get a credit card with cash rewards

Drop the “no frills” credit card that you currently have and get one credit card with a great “cash back” reward. Credit cards that offer a reward plan usually have a higher interest rate, so be sure that you make regular on time monthly payments to clear the balance.

Saving Tip #7: Put aside your tax refund

It can be tempting to spend what you get back in your tax refund each year, but by putting aside money returned, you can make big steps to reaching your goal of affording a down payment.

Saving Tip #8: Sell some of your stuff

Pick a day with a forecast of good weather and throw an old fashioned yard sale. Post signs around the neighborhood in the days leading up to your sale and promote it online on Facebook and Craigslist. The more promotion you do, the more people turn out, and the more money you make selling your stuff.

Saving Tip #9: Sell your stuff online

Are some of your possessions valuable or highly sought after? You will probably get more cash by selling them online through eBay than you will at a yard sale. Larger items of furniture tend to sell better on Craigslist.

Saving Tip #10: Learn all you can

One of my favorite experts on the topics of financial health is Dave Ramsey.  If you haven’t already, check out Total Money Makeover and utilize the many free tools on his website.

 

Summary:

The bigger your down payment, the more peace of mind you’ll have as a home owner: our monthly payment will be lower, and you’ll sleep at night with the confidence that you have equity in your home.

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The above information regarding “Top Tips to Save for a Down Payment ” was provided by Nicole Smith with Briggs Freeman Sotheby’s International Realty. Nicole has over 20 years of experience helping families buy and sell homes in the Dallas/Fort Worth area. If you’re thinking of selling or buying, she’d love to share her knowledge and expertise. 

The communities she proudly serves include Flower MoundSouthlakeGrapevineTrophy ClubKellerColleyville.

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