So, you’ve decided to purchase a home? Congratulations! As one of the largest financial purchases you may make in your lifetime, it is important to be aware of and start saving for your new home as soon as possible – starting with your downpayment.
The best way to begin is to create a plan of action that reasonably fits within your current lifestyle. Every homebuyer’s situation is unique to them. That is why we’ve included a range of techniques for saving towards your big purchase.
- Create a goal. The first step in any money-saving plan is to create a goal. To determine this, it is helpful to first decide which mortgage loan program is right for you. See our full list of Mortgage Loan Programs and the down-payment amount required for each. Once you know this information, you can start to work towards your goal.
- Implement money-saving techniques. Saving towards any large monetary goal doesn’t happen overnight. To help you start working towards your savings, we’ve listed a few techniques that can help get you on your way:
- Set up an automatic transfer to a savings account. This can be done through most banks, making saving virtually effortless.
- Save tax refunds. Tax refunds are another helpful bonus you can add to your down payment fund.
- Save unexpected income such as bonuses or raises. Though it may be tempting to spend this unexpected income right away, think of it as a bonus you can add to your ever-growing house fund.
- Apply for a credit card with cash rewards. If you’re going to apply for a credit card, it can be helpful to make sure you go for one that gives you cash rewards. This way, you can save this cash towards your home.
- Don’t take on any new unnecessary expenses, such as a new car payment or car lease. Try to eliminate expenses that you can.
- Set up an automatic transfer to a savings account. This can be done through most banks, making saving virtually effortless.
- Take advantage of first-time homebuyer programs. These are state-specific so make sure you know what is available to you based on your geographic location. For a comprehensive list of first-time homebuyer programs in each state, check out this article by Nerdwallet.com.
- Put your money in a high-yield savings or money market account. These accounts can accumulate interest while remaining liquid enough to be accessed at any time.
You can also open a CD, or certificate of deposit. This allows you to accumulate more savings than a high-yield or money market account.
Keep in mind, the money you put into a CD is inaccessible to you for a period of time and has a penalty to open. This is a good way to save money that you do not see yourself needing in the near future.