Creative Ways to Save Up for a Down Payment on a House
How to Save Up a Down Payment for a House
The high cost of a down payment keeps many first-time home buyers from entering the housing market. If you’re struggling to save, these creative saving and budgeting tips can bring you closer to your dream home.
Look into special programs. There are a variety of federal, state and local programs designed to provide down payment assistance to qualified borrowers. Research your state’s Housing Finance Agency (HFA) and other local assistance programs to see if you qualify for down payment assistance or affordable mortgage rates.
Cash in savings bonds. If you make an early withdrawal from your 401(k) or traditional IRA, you will endure costly penalties. Fortunately, you won’t face similar penalties if you cash in a savings bond after five years. If you received savings bonds as gifts when you were younger, you should consider cashing them in and investing the money in a new home.
Use an app. Modern apps make it easy for you to keep tabs on your down payment goals. They also create incentives by keeping your goal at the forefront of your mind. Some of the most popular budgeting tools include Dollarbird and Mint. Some apps will round up your purchases and invest the extra change in a diversified stock portfolio that can help you accrue even more down payment cash.
Cut your costs. By making a few cost-cutting lifestyle changes, you can save up to $600 per month. Some good options include:
- Taking a hiatus from the gym: $60/month
- Buying generic grocery brands: $150/month
- Reducing your clothing budget: $100/month
- Eating out only on special occasions: $200/month
- Cutting out cable or pricey streaming services: $60/month
Other Popular Strategies
Redfin recently conducted a survey of prospective homebuyers to find out how they were saving up money for down payments. While 69% said the majority of their funding would come from paychecks, most had other ideas for how they would supplement their financing strategies. The most popular option included:
- 36% – Working a second job
- 24% – Asking for a cash gift from family members
- 15% – Driving for a ride share service
- 13% – Selling stock investments
- 13% – Withdrawing from retirement funds early
- 12% – Pulling money from inheritances
- 12% – Reducing retirement savings
- 10% – Selling cryptocurrency investments
While these strategies may not work for everyone, you should think about trying to include one or two as part of your overall savings strategy. You should also thoroughly research available federal, state and local programs even if you think you won’t qualify. Many local governments have set up generous offers for first-time buyers in an attempt to attract more residents to their communities.
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