The larger the down payment you can make, the better deal HomeSure Lending will be able to offer you on your mortgage. Bigger down payments usually indicate a better financial position, which translates to better interest rates and a cheaper mortgage in the long run. But how do you save for a down payment? Even if you’re not thinking about buying a house for a couple of years, saving right now is the best way to make sure you can put a great down payment on that house. Here’s how to do it:
Open a Savings Account
You may already have one—many parents will open a savings account for their children and deposit any monetary gifts or windfalls into the account. If you don’t already have one, open one as soon as possible, and make sure it pays great interest. Online banks often offer higher yield savings accounts than local banks do.
Create and Stick to a Budget
Make sure that budget includes your savings. Even if you can only put away a hundred dollars a month, at the end of the year, you have an extra $1200 that can go towards your down payment. That can make a huge difference when it comes time to actually buy a house. Don’t leave anything out of your budget—if you have expenses that are unaccounted for, you will be bleeding money that could be going towards your down payment.
Cut Down on Spending
Most people spend far more than they have to every month. While there’s nothing wrong with buying what you want and/or need, as long as it’s within your budget, holding off on the luxuries and extras when you are saving for a home is a great way to put some extra money away and afford a larger down payment when the time comes.
Save Your Windfalls
If you have a windfall of cash, like a tax return, a large monetary gift from a friend or family member, or other sudden influx of money—do not spend it. It is very tempting to grab that cash and take it right to the mall, electronics store, or car lot to make a purchase. However, depositing a large chunk of money into your savings account or even purchasing a CD or other high-yield, low-risk investment will ensure your ability to make a large down payment on a house when the time comes.