One of the most common barriers to homeownership is a down payment. Most lenders require a down payment before they’re willing to cover the rest of the purchase. Coming up with the required 3-25% down payment can be difficult for many home buyers. Here are a few unique ways to help you save up for a down payment.
Set a Strict Budget and Stick to It
Setting a strict budget gives you a guideline and designates a portion of your salary to save for a down payment. Write down your anticipated monthly income on a sheet of paper. Then, list your expected monthly expenses. Track your spending for a month or two to determine how much you spend on fluctuating categories, like dining out or groceries.
Set a realistic budget and look for areas you can cut, and shift the funds instead to a savings account. Many financial experts also recommend paying yourself first. Treat your savings goal as a monthly bill that has to be paid. Of course, speaking with an expert at District Lending for an AZ home loan can also help you calculate exactly how much you’ll need to save for a down payment, so you can set clear goals.
Rent Out a Room
If you have an extra room, consider renting it out for income. Of course, if you’re currently renting, you may need permission from the property manager or owner before allowing someone else to move in. If you live in a popular tourist area, like New York City or Phoenix, consider renting your extra room to travelers. You may also have a friend or close family member who’s also saving for a home that’s willing to share a smaller space so you can both save up for a down payment.
Make Your Hobby Profitable
Some hobbies can be profitable. For example, if you’re good at sports, consider coaching a local little league team on the weekends or in the summer months. If you’re crafty, you can sell your craft items online. If you’re a good student, you may find that local college students are willing to pay for a tutor. If you’re a good writer, you may find teaching online a profitable business decision. Take any money you earn and put it directly into a savings account.
Save Bonuses and Raises
Bonuses and raises are always a welcome addition to your salary. Rather than increasing your expenses with each raise, continue living as if you had never gotten the raise. Redirect any bonus or raise money right into a savings account. This can help you save up faster for a down payment.
Gig work makes it easy to work around other work schedules. You can deliver groceries on the weekends for tips or pick up and deliver food from nearby restaurants in the evenings. Most gig work companies make it easy to sign up too. Usually, all you have to do is download an app, submit an application, and then complete the training. Dedicate any earnings you receive toward a down payment.
Sell Your Stuff
Once you save up enough to buy a house, you’ll likely offload a lot of your stuff anyways. If you start now, you’ll have less to pack, and you can redirect the money you earn to a down payment. Go through all your belongings and identify any items you no longer use or don’t want. These items may be worth some money. You can usually list these items on eBay or Facebook Marketplace.
Choose a High-Interest Savings Account
Saving your intended down payment in a high-interest savings account allows you to earn on your savings. The longer you leave your money in the account, the more you can earn. Depending on how long you plan on saving, depositing your money into a certificate of deposit (CD) can also be a good way to earn more.
Ask About Down Payment Programs
Some lenders offer down payment assistance programs to help you achieve homeownership faster. Grants are sometimes available to first-time home buyers. Depending on your income, you may also qualify for cash grants or low-rate loans. Some cities and states also offer buying incentives for buyers willing to purchase in areas needing improvement. These programs may require that you stay in the home for a certain number of years.
Saving for a down payment doesn’t have to be an impossible barrier. With a strict budget, more careful spending, a designated savings account, and a financial plan, you can save up the money you need to buy a house.