5 Steps to Save for a Down Payment
Without a doubt, having the money for a down payment is most people’s biggest obstacle to overcome when trying to buy a home (or any real estate). Everyone from your uncle to your hairdresser is willing to give you advice, but will you use it? We’ve trimmed the fat off of this topic and put together five things you can actually do. They may not all apply to you, but if you put a few of these into practice, you’ll have a down payment before you know it.
Talk to a qualified mortgage lender.
You need to learn what it means to take out a loan, what the approval process looks like, what your credit score is and how it affects said loan.
Why? A lender can help you understand where you are financially, where you want to be, and how to get there. This will make your saving process more intentional, and therefore more effective.
A mortgage lender can also coach you on improving your credit score while you’re saving. If you do this, you’ll have more money to put down on a home, but more than that, you’ll have a better chance at qualifying for a higher loan and a lower interest rate. Win win.
Have a budget and stick to it.
Why? Personal finances really boils down to simple math: how much you have coming in and how much you have going out. Avoiding it doesn’t make it go away. (Want a really clear way to visualize your incoming and outgoing finances? Check out our blog on DTI)
You know what budgeting is, you probably just need help doing it. Here are some of the services and apps we recommend:
Mint - Mint connects to your bank accounts, automatically categorizes what you spend, keeps track of your budgets (eating out, etc) and notifies you when you’re going over the limit you set. It will also help you monitor and improve your credit - all for free!
Expensify - This service is so simple to use, and might be for you if you want a no-fuss option that isn’t connected to your bank account. Whether you own a business or just have a habit of supporting many businesses with your money, Expensify can help you keep track of where your cash goes - without having to save a bunch of paper receipts.
Google Sheets - If you don’t mind doing the tracking yourself and just need help organizing it, you might love Goole Drive as much as we do. Using the Sheets budget templates, you’ll get spreadsheet that is already designed in their template gallery to optimize your time. We especially love that this can be shared with family, friends, or your partner through Google Drive.
Sell some stuff.
Maybe you’ve cut your expenses as much as you can, and still need to add a little cash to your savings. Next time you’re in your basement, or back at your parents house, or rummaging through the garage - stop and look around. See anything you don’t need anymore?
Why? Those items could be valuable to someone else. Maybe it’s something you use every day, and maybe it’s just collecting dust right now, but you can turn those things into cash. If you turn that cash into a real estate purchase that grows in value over time, your stuff is now making you money. That’s our kind of magic trick.
Maybe you and your spouse share a car for a little while. Maybe you don’t need those beanie babies anymore. Learning to liquidate assets is a great lifelong skill that will help you boost your savings.
Get a second job.
Okay, you’ve got a clear picture of your monthly income and expenses. You’re sticking to your budget, and you’ve sold off some assets you didn’t need anymore. You’re crushing it, but you’ve reached a plateau.
Why? Extra income would change everything. It’s the missing recipe, and you have the ingredients. Have some extra time? A skill you’re not monetizing? A passion that is currently untapped?
Almost every who’s serious about money has a side hustle right now. Just in my direct circle of friends, one person edits podcasts for strangers, another drives Uber, and another finds interesting clothes in thrift stores and resells them for more. The possibilities are endless.
Cut back on rent.
Cutting back on expenses, in general, is not fun. But your expenses can be less expensive. It’s going to require some sacrifice, but nothing worthwhile comes without a bit of suffering. You probably did a bit of this in step two when you were budgeting, but chances are your biggest expense was rent.
Why? If you’re renting, you’re almost always overpaying. Even if it’s a fair price, it’s money down the drain. You’re never getting that cash back. So, if you can’t buy, try to make your rent as little as possible.
Get a cheaper place. Get a smaller place. Share a place. Share a room! Whatever it takes to get your biggest expense down to something manageable.
Get ready for a change of scenery.
If you do these simple steps, you’re going to be needing a real estate agent sooner than later - give us a call! We’d love to help you out.