If you’ve set your sights on purchasing a home this year, why not make saving up for a down payment your New Year’s Resolution? Saving money for a home can be one of the largest hurdles for hopeful homeowners to overcome, but the truth is, saving can be more manageable than you think.
How Much Do You Need?
Deciding how much to save for a down payment starts with determining how much of your income you can afford—and want—to spend on your monthly housing cost and the requirements of your lender. While many lenders may recommend saving 5–20 percent of the home’s price for a down payment, that figure is often daunting. However, a little effort and dedication—along with some easy savings tips—can start you on your way to achieving your
down payment goals.
How Can You Save Up?
The best way to boost your savings is to cut your expenses. Consider these easy tips to cut your current costs and put more money in your savings account:
- Make yourself accountable for every penny. Track your spending for one month to see what you spend the most money on and try to reduce those costs.
- Plan your meals in advance and make a list before you go to the grocery store. Coupons can help you save even more as long as you use them on things you normally purchase.
- Consider carpooling or public transportation to save money on commuting expenses.
- Instead of going out for entertainment, try hosting a potluck, movie night or game night at your home with family or friends.
- Pack your lunch, breakfast and even coffee for work. You will be surprised how much you can save.
- Embrace freebies. Instead of purchasing, rent books and DVDs from the library. In addition, check your local paper or community website for great free activities and entertainment.
- Repair items that are broken instead of replacing them. Instead of buying a new shirt when you lose a button, break out the sewing kit. The same goes for simple home repairs.
- Do you really need that expensive cable package? Opt for streaming services instead, which only require an internet connection and cost significantly less.
- Do you have a gym membership, online subscription or magazine subscription that you don’t use? Lose them and reap the savings!
- Buy items that you use a lot of in bulk, like toothpaste, toilet paper, trash bags and other nonperishables.
Estimate your savings from these and other cost-cutting measures and then set up automatic deposits from your paycheck to your savings account. Remember to save one-off income and windfalls like tax returns, annual bonuses, cash gifts and side income earnings. Instead of spending these extras, dedicate a large percentage to your down payment savings. Be careful with credit and debit cards, and avoid incurring interest, late fees and other fees. Pay balances on time to avoid penalties that can impact your ability to save.
Give Your Down Payment a Boost
If you are still having trouble saving a down payment, you’re not alone. Most first-time home buyers are transitioning from a rental home or apartment, and rent can eat up 30 percent or more of a family’s income. Student debt is also a factor, averaging 10-15 percent of income in some cases. These expenses can make saving enough for a down payment a struggle.
While a 5-20 percent down payment is recommended, it is not always necessary. Depending on your income, the target home price or the property location, there may be loan options available to you that require little or no down payment and resources to help you meet your down payment requirements.
The NC Home Advantage Mortgage™ offers 100 percent financing and forgivable down payment assistance of up to 5 percent of the mortgage loan amount for homebuyers who qualify. The NC Home Advantage Mortgage™, offered by the NC Housing Finance Agency through participating lenders statewide, may help you get over the down payment hurdle to homeownership.
