To assist home buyers in saving for a down payment, we asked mortgage bankers and CEOs for their top financial tips. From creating a budget and automating savings to living off one income and saving the other, here are sixteen expert recommendations to help you reach your homeownership goals. Here are 16 financial tips to help home buyers save for a down payment:
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- Create a Budget and Automate Savings
- Automate Savings for Consistency
- Explore Homebuyer Assistance Programs
- Pay Off High-Interest Debt
- Reduce Unnecessary Expenses
- Set Up a Dedicated Savings Account
- Boost Income With Side Hustles
- Use High-Interest Savings Accounts
- Allocate Unexpected Bonuses
- Seek Professional Financial Advice
- Consider Lower Down Payment Options
- Utilize Micro-Investing Platforms
- Sell Unused Items for Extra Cash
- Prioritize and Stick to a Budget
- Make Temporary Sacrifices for Savings
- Live Off One Income, Save the Other
Create a Budget and Automate Savings
To effectively save for a down payment, start by creating a budget to determine how much you can realistically save each month. Setting up an automatic withdrawal to a designated savings account can ensure consistent savings. Additionally, consider contributing extra funds to your 401(k), as these funds might be an option for a down payment and typically grow faster than a standard savings account. Finally, make an appointment with a mortgage officer, who can guide you through available down-payment assistance programs and help you understand how much you need to qualify.
Caius Gall, Mortgage Banker, BOK Financial
Automate Savings for Consistency
One effective financial tip for saving for a down payment is to automate your savings. Set up a separate savings account specifically for your down payment and arrange for a portion of each paycheck to be automatically transferred into this account. This approach makes saving consistent and effortless, and it helps you stay disciplined by treating your down-payment savings like a fixed expense. Over time, this can significantly boost your savings without requiring constant manual effort.
Taylor Kovar, CEO, The Money Couple
Explore Homebuyer Assistance Programs
I always recommend clients explore homebuyer assistance programs. In Utah, for example, we have the Utah Housing Corporation (UHC) that can help first-time buyers with their down payment and closing costs. They offer low-interest rates and the ability to combine it with a down payment assistance second mortgage.
Those who aren’t first-time buyers have the option of the Home Again Loan, which is available to repeat buyers and those with lower incomes who don’t qualify for the FirstHome Loan. Both programs have flexible credit requirements.
The UHC also has a unique First-Time Homebuyers Assistance Program that provides up to $20,000 in the form of a 0% interest loan to help with the down payment, closing costs, or interest rate buydown on a newly constructed home. This is a great option for first-time buyers who have been saving up but need that extra boost to make homeownership a reality. Just keep in mind that you’ll need to pay the loan back when you sell or refinance the home.
Mike Roberts, Co-Founder, City Creek Mortgage
Pay Off High-Interest Debt
Prioritize paying off high-interest credit card debt to free up more money for your down-payment savings. High-interest debt can significantly impede your ability to save effectively. By reducing or eliminating this debt quickly, you’ll increase your disposable income, which can then be redirected towards your savings goal.
This strategy not only accelerates your path to homeownership but also improves your overall financial stability, making it easier to manage future financial commitments.
Omër Güven, Co-Founder & CEO, Fintalent
Reduce Unnecessary Expenses
One valuable financial tip for home buyers looking to save for a down payment is to reduce their expenses. Many people operate under the misconception that they need to earn a higher income to save for a down payment, but often, the key lies in making smarter choices with the funds they already have.
By identifying and reducing unnecessary expenses, such as dining out—which can quickly add up—entertainment costs that might include frequent movie outings or concerts, and subscription services that may not be fully utilized, individuals can free up a larger portion of their income. For instance, preparing meals at home instead of eating out not only promotes healthier eating habits but can also lead to substantial savings over time.
Additionally, re-evaluating entertainment choices and opting for more budget-friendly activities, such as community events or outdoor adventures, can help maintain a fulfilling social life without breaking the bank.
Brandon Beatty, Founder & CEO, Southern Hills Home Buyers
Set Up a Dedicated Savings Account
One effective financial tip I can offer to help buyers save for a down payment is to create a dedicated savings account specifically for this purpose. By setting up a separate account, buyers can prevent themselves from dipping into these funds for other expenses or temptations. Additionally, automate regular deposits into this account from your primary income source to ensure consistent and disciplined saving habits.
Another strategy is to cut back on unnecessary expenses and prioritize saving a percentage of each paycheck towards the down-payment goal. It may also be helpful to explore alternative sources of income, such as freelancing or part-time work, in order to accelerate the savings process. By diligently following these steps and adhering to a strict budgeting plan, potential buyers can effectively accumulate the necessary funds for their down payment in a timely manner.
Guy Cusumano, Realtor, Howard Hanna – Rand Realty
Boost Income With Side Hustles
Look for ways to boost your income. There are many ways through which you can create an alternate source of money. You can consider starting a blog, YouTube channel, or simply affiliate marketing. You can start an online store and make good money if you have done proper research. There are multiple videos online through which you can learn about online businesses. You don’t need a considerable investment to start any of these activities. All you need is a laptop and some time. There is a TEDx video on YouTube that says that you only need 20 hours to learn a skill to a satisfactory level.
Your budget consists of two parts: money coming in and money going out. You’ll get the best results if you make improvements on both sides. Open a savings bank account for the purpose of a down payment and consider it untouchable. Barring a major emergency, don’t even toy with the idea of spending any of that money until you are ready to purchase a home. It’s easier to keep an off-limits down-payment fund if you set up a separate account dedicated solely to this purpose.
Chris Hoffman, Owner, Lehigh Valley Just Listed Real Estate
Use High-Interest Savings Accounts
The Bank of Canada’s recent rate-cut decisions have lifted the spirits of prospective homebuyers. Lower rates mean better affordability, and if rates continue to fall, these small drops will make a big difference for buyers. All this means now’s the perfect time to start laying the groundwork for your homeownership journey.
You must begin by saving aggressively for the crucial down payment. But make sure, like most homebuyers, you don’t stash your money in a traditional savings account. The regular savings accounts in Canada offer very low interest rates on your investment, typically ranging from just 0.01% to 0.050%. With such lower interest rates, your money will grow at a snail’s pace, and saving up for the down payment will take much longer.
Instead, you must park your savings where you can earn more money, like a high-interest savings account (HISA). On a high-interest savings account, you can earn between 1% to 3% or even higher on your savings. Also, unlike other savings and investment options, you can withdraw your funds from a HISA whenever you need them. But keep in mind that many high-yield savings accounts are offered by online banks. So, depositing cash, checks, or face-to-face interactions with the bank personnel is not an option here.
Robin Cherian, CEO, The Canadian Home
Allocate Unexpected Bonuses
A valuable tip for prospective home buyers is to allocate any unexpected bonuses or windfalls specifically for their down payment. These financial boosts can come in various forms, such as tax refunds, work bonuses, or even monetary gifts from generous family members and friends.
By consciously directing these additional funds into their savings, home buyers can significantly accelerate their journey toward homeownership. This approach not only helps to increase the down-payment amount, making it easier to secure a mortgage with favorable terms, but it also instills a sense of discipline in managing finances.
Having a larger down payment can reduce monthly mortgage payments and eliminate the need for private mortgage insurance (PMI), ultimately saving buyers more money in the long run. By strategically utilizing these unexpected funds, buyers can make their homeownership dreams a reality much sooner than they might have thought possible.
Alex Capozzolo, Co-Founder, Brotherly Love Real Estate
Seek Professional Financial Advice
If you’re struggling to save for a down payment, it may be beneficial to seek professional financial advice. A financial advisor can assess your current financial situation and provide personalized guidance on how to reach your savings goal. They can also offer advice on improving your credit score, reducing debt, and creating a budget that aligns with your financial goals. Remember, every individual’s financial journey is unique, so seeking professional help can provide valuable insights and strategies tailored specifically to your needs.
Danny Colacicco, Founder & CEO, Panda Pro Home Buyers
Consider Lower Down Payment Options
While most home-buyers opt for traditional 20% down payments when purchasing a home, there are other mortgage options available that require lower initial payments. For example, an FHA loan only requires a minimum of 3.5% down payment, while a VA loan and USDA loan do not require any down payment at all. However, it’s important to note that these options may come with additional fees or insurance premiums. It’s essential to thoroughly research and consider all factors before deciding on an alternative mortgage option.
Erica Nunley, Founder & CEO, Nunley Home Buyers
Utilize Micro-Investing Platforms
The trick to saving some money for a down payment is to use micro-investing platforms. These let you put in small amounts of money, sometimes as little as the cents you get back from buying things every day, which can grow over time.
Micro-investing apps round your daily purchases up to the nearest dollar before investing the difference into diversified portfolios. For instance, if you buy lunch at $4.50, the app will round it off to $5 and invest $0.50 more. With time, such small investments can amount to a considerable sum.
Choose a micro-investing app with low fees and a track record of solid returns. Regularly review your investment strategy to ensure that it corresponds with your down payment timeline and financial objectives. This way, your everyday spending habits can be converted into an effective tool for saving towards a down payment on a home.
By incorporating micro-investing into savings planning, your daily expenditures, starting from cents, can turn into significant savings, helping you achieve the goal of purchasing property in the future by leveraging small quantities of change over longer durations.
Johnny Austin, Owner, Sell My House Now LLC
Sell Unused Items for Extra Cash
One of the solutions for home buyers trying to save up for a down payment is to sell unused or underutilized things. Many people have valuable assets gathering dust, from old electronics to furniture and collectibles. Very valuable items will fetch money fast if you can sell in a garage sale, through sites online such as eBay and Facebook Marketplace, or nearby consignment shops. This not only boosts your savings but also declutters your living space, creating a more organized and stress-free environment.
In my case, running a recycling business myself, I have observed that converting waste into money benefits both the seller and the environment in parallel. By extending the life of products through resale, we reduce demand for new products and the consequent environmental impacts.
Gil Dodson, Owner, Corridor Recycling
Prioritize and Stick to a Budget
Aspiring home buyers often face the challenge of saving for a down payment, which can seem like a daunting task. However, by prioritizing this financial goal and making it a top priority, you can achieve homeownership sooner rather than later. A valuable financial tip for home buyers looking to save for a down payment is to develop a budget and adhere to it consistently. This means identifying your monthly income and expenses and setting aside a specific amount each month toward your down-payment fund. By creating a budget and tracking your spending, you can find areas where you can cut back on unnecessary expenses and redirect those funds toward your savings goal.
Mike Otranto, President of Acquisitions, Wake County Home Buyers
Make Temporary Sacrifices for Savings
If you’re on a home-buying journey, then this is the time to get brutal. For a few months to a year, or however long your timeline is, move back in with parents or friends, rent out spare rooms in your home, downsize to just one car—anything you can do to scrounge up some cash is worth it. Remember it’s for a limited time only, so in 6 months’ time you won’t remember that time you didn’t have Netflix, but you will be enjoying your new home.
Rick Berres, Owner, Honey-Doers
Live Off One Income, Save the Other
One simple way (but it can be challenging) my wife and I saved up for a down payment is to live off one income and save the second. This does require paying down debt and really eliminating it entirely, creating a budget together, and then sticking to it (and showing each other grace when you don’t). We were able to do that with the purchase of our first house and definitely with our second one. With equity in our first, it really wasn’t challenging at all. Most couples who both work can easily live off one by sacrificing their lifestyle now to afford a house in the future.
