Never underestimate the importance of a sizable down payment on your home loan. Although your monthly mortgage payments will cover the majority of your new home's costs, a large down payment can help you increase your chances of qualifying for a loan, qualify for a better loan, and help you avoid private mortgage insurance. If possible, you should try to save enough for 20% down, or more. After all, a larger down payment can translate to smaller mortgage payments, a lower interest rate, and instant equity in your home. Read on for helpful tips on saving for a down payment.
Create a budget. If you don't already have a budget, create one now. Figure out how much you're currently spending on essentials (groceries, toiletries, medical bills, electricity, etc.) and luxuries (eating out, new clothes, gadgets, movies), and then determine where you can make cuts.
Cut back on small luxuries. Bring your lunch to work instead of eating out. Put on a warm sweater and turn off your heater. Rent a move instead of going to the theatre. Cancel your gym membership and head to the park. Although one small change won't make a dramatic difference, the combination of several can be very effective.
Downsize your current housing. Where do you currently spend the majority of your paycheck? If you're a first-time homeowner, the answer is likely rent. So, to save money quickly, considering moving into a more modest apartment. The move will be temporary, and you'll save money much faster.
Add to your savings as soon as you get your paycheck. Consider putting a specified amount of money in a separate savings account as soon as you receive your paycheck each month. If you can't see the money, you won't be as likely to spend it.
Avoid pulling money from a retirement account. Finally, although it may be tempting, try not to pull money from your traditional IRA, 401(k), or another retirement account. There are better ways to save money. Plus, 401(k) loans have to be repaid, and taxes must be paid on money pulled from traditional IRA accounts.
Create a plan and stick to it. With some hard work and dedication, you'll save up that down payment in no time.