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Tips to save for mortgage down payment
2/14/2023 | By Team United
How to save for a home
Tips to save for mortgage down payment
Saving for a down payment on a house can be the biggest obstacle first-time or repeat home buyers have to overcome.
You might have heard you need a 20 percent down payment to purchase a home. While that’s true in some cases, there are a variety of home loans that have smaller minimum down payment requirements that can make it seem a little more attainable.
Saving all the money for your down payment will likely take some time, but with a little expert advice on your side, you can be on your way to reaching your goal and buying your dream home.
Find small ways to cut your spending
Do you have monthly streaming subscriptions you’re not regularly using? Do you often pick up a $10 lunch during the week or a $5 coffee when you could be making it from home?
Going out to eat, buying a latte, or having multiple subscriptions can seem like no big deal, but those expenses add up quickly. Plan ahead to make dinner at home and bring your own lunch and coffee to work to get more bang for your buck.
Next, take your savings up a notch. Each time you resist the temptation of spending, throw that money in your savings account instead. You’ll be surprised how quickly it’ll add up.
Gifts, tax returns, and bonuses
Let’s face it, it’s tempting to spend your birthday money, tax return, or yearly bonus on that large ticket item you’ve had your eye on. This year, instead of spending it right away add it right to your savings. You’ll thank yourself in the long run.
Keep your down payment savings in the right account
Instead of keeping all of your money in your checking account, open a separate savings account just for your down payment.
Do you want an account with a higher interest rate, need the money out of sight and out mind, or do you want a combination of tools and accounts? Doing your research and asking for advice on the best account can get you on your way to success.
In addition to adding money to your savings on a regular basis, help your money grow by opening a higher interest money market account. You’ll earn interest each month while still having access to your money just in case you need it.
Planning ahead has major benefits. If homeownership is in your future, but you plan to wait a couple years, a certificate of deposit is a great option to boost your savings.
With a CD, you will lock up your money for a certain amount of time and earn a higher interest rate. This option takes the temptation right out of spending your hard-earned cash by keeping it locked up until it’s time to use it to secure your new home.
Bottom Line
There are several savings accounts, tools and tips to save up enough for a comfortable down payment on a home. Seek out expert advice from your credit union and find the best option and savings plan that fits your unique situation. When you’re ready, reach out to your local mortgage advisor to get prequalified and set a budget so you know exactly how much house you can afford.
