If you want to buy a home, you\u2019ll need to know how to save for the biggest upfront cost \u2014 the down payment. Some loans don\u2019t require any down payment, but you\u2019ll typically need at least 3%. If you can put down 20%, you won\u2019t have to pay private mortgage insurance (PMI).<\/p>\n
Here\u2019s what you need to know about saving for a down payment:<\/b><\/p>\n <\/a><\/p>\n The following strategies can help you save up for a down payment on your mortgage<\/a>.<\/p>\n An automated savings plan transfers money from your checking account to a designated savings account at a set time and frequency.<\/p>\n Prioritizing your down payment savings and moving the money to an account where it\u2019s harder to spend may help you reach your goal sooner.<\/p>\n In addition to moving money automatically every so often, keeping that money in a savings account earmarked for your down payment can help you save.<\/p>\n You may be less likely to touch that money for other purposes, like repairing your car, if you have separate savings accounts labeled for different purposes.<\/p>\n Some banks make it easy to organize your savings. Ally, for example, has a \u201cbuckets\u201d feature, which are just labeled sub-accounts within your main savings account.<\/p>\n No one would blame you if you were sick of hearing the advice to take up a side hustle. Shouldn\u2019t one job be enough?<\/p>\n But a second job really is a great way to boost your income to meet a short-term goal, like saving for a down payment. With the increased ability to work remotely and take on flexible independent contractor jobs, generating extra income has never been easier.<\/p>\n Here\u2019s an easy way to trim your budget<\/a>. When you\u2019re looking at your monthly spending in a certain category, or going through your recent purchases, ask yourself: \u201cWould I rather have this, or would I rather own a home?\u201d This simple question can help you prioritize your spending.<\/p>\n It\u2019s OK if you don\u2019t want to cut everything \u2014 or anything \u2014 to buy a home. Asking yourself this question repeatedly might reveal that you\u2019re actually happier renting, and that\u2019s fine.<\/p>\n High-interest credit card debt sabotages your savings. Paying down your balances will give you a great return on your investment and free up money you can put toward your down payment.<\/p>\n If paying off your credit cards isn\u2019t feasible right now, look into getting a new credit card with a 0% promotional interest rate<\/a> and transferring your high-interest balances. Pay off as much as you can each month \u2014 and make sure you don\u2019t run up new charges on your paid-off cards.<\/p>\n The average monthly payment for Americans with new car loans is nearly $600 per month, according to an analysis by Consumer Reports<\/a>. What\u2019s more, the analysis revealed that borrowers often wind up paying interest rates that are much higher than average for their credit profile.<\/p>\n If more than 10% of your income goes to your car payment, consider trading in your car for a less-expensive used model. Used car payments average $430 per month, according to a recent Experian Automotive<\/a> industry report \u2014 that\u2019s a savings of about $150 per month, or $1,800 per year. You might save even more by shopping around for a better interest rate.<\/p>\n You could be sitting on a treasure trove of clothing, electronics, vintage items, and other belongings that might fetch good money for your down payment fund.<\/p>\n To get an idea of how much your items are worth, conduct a search for the item on eBay or a similar site like Poshmark, Mercari, or Etsy. Then list your items there at a competitive price. You can also sell them locally on platforms like Facebook Marketplace or OfferUp.<\/p>\n At first thought, moving in with your parents might sound like a step in the wrong direction. But according to data from the Census Bureau, it\u2019s actually become more common in recent years due to the pandemic.<\/p>\n In exchange for giving up some freedom and privacy, you can potentially save hundreds or even thousands of dollars a month and put it toward a home down payment.<\/p>\n Meet with your parents ahead of time to get the OK and work out how you\u2019ll share household expenses and chores.<\/p>\n Reducing your monthly bills is a relatively painless way to divert more cash to your down payment fund. Infrequently used subscriptions for cable TV, music, and video streaming, and other digital content are a good place to start.<\/p>\n You might also shop around for or negotiate lower rates on phone and internet service. If you\u2019re unsuccessful, consider having a company like Billshark negotiate on your behalf in exchange for a percentage of any savings they get you.<\/p>\n Reducing your insurance premiums can also save you a lot of money. If your credit score has increased since you took out insurance, contact your insurer to see if you\u2019re eligible for a premium reduction.<\/p>\n You may also want to consider increasing your deductibles and dropping collision or comprehensive coverage on old cars to reduce your premiums. Some experts say these coverages might not be cost effective if your car is worth less than 10 times the premium.<\/div><\/div>\n Some people don\u2019t have the means to save for a down payment. If that\u2019s you, look into down payment assistance programs<\/a>. They\u2019re designed to help low-income earners who want to buy a primary residence, and the money can come in the form of a low-interest loan or a grant you don\u2019t have to repay.<\/p>\n If you\u2019re looking for a new home loan, Credible can help. We make comparing multiple mortgage lenders easy.<\/p>\n <\/a><\/p>\n Among all buyers, the median down payment<\/a> is 12%, according to the National Association of Realtors. However, this figure includes repeat buyers, not just first-time buyers<\/a>, and repeat buyers often put equity from their current home toward the down payment for their next home.<\/p>\n\n
10 ways to save for a down payment<\/h2>\n
1. Set up an automated savings plan<\/h3>\n
2. Keep your savings in a dedicated account<\/h3>\n
3. Take up a side hustle<\/h3>\n
4. Trim your budget<\/h3>\n
5. Pay off credit card debt<\/h3>\n
6. Reduce your car payment<\/h3>\n
7. Sell belongings you don\u2019t need<\/h3>\n
8. Move in with your parents or in-laws<\/h3>\n
9. Lower your bills<\/h3>\n
10. Look into down payment assistance<\/h3>\n
How much to save for a down payment<\/h2>\n
Minimum down payment by mortgage type<\/h3>\n\n