Saving money as a First-Time Homebuyer for a down payment may be challenging. Many people use the profits made from their previous home as part of the down payment for their next home. But as a first-time buyer, this is a luxury you don’t have simply because it’s your first home purchase. You’ll have to use other means for funding your purchase such as savings from your paychecks, gift money, or investment money. Below, we’ve shared some ideas for ways first-time buyers can save up to make their dreams a reality.
How Much Money Do I Need for a Down Payment?
There’s an old myth that you need to save 20% for a down payment in order to buy a home. However, this isn’t necessarily the case. How much you’ll need to save depends on what type of loan you’re getting. There are loan programs out there for first-time buyers that require a down payment of only 3.5%. Some buyers may even be able to get away with putting down less.
This is not to say that you shouldn’t make any effort to save. Your down payment amount can also affect your mortgage rate. The more you put down, the less of a risk you are to the lender. Furthermore, if you put down less than 20% you may have to pay private mortgage insurance. Additionally, it’s worth noting that some lenders have their own requirements for down payments.
Ideas for Saving for a Down Payment as a First-Time Buyer
Now that you understand the importance of having money for a down payment, let’s talk about ways you can save. Here are some suggestions we often make to first-time buyers:
Look into Grants & Down Payment Assistance
There are grants and down payment assistance programs out there that are geared towards first-time homebuyers. Check with your lender to see if they know about any state or local programs that would be a good fit for you.
Cut Down on Spending
The most obvious way to save money is to try to reduce your spending. Pay down your credit cards and avoid racking up more debt. Try to limit your spending to buying only what you need and nothing more.
Another great idea is to automate your savings. Set things up with your bank so that there are regular transfers made into your savings account.
Increase Your Income
You may also want to consider getting a side gig. Many first-time buyers will take on a second job temporarily in order to save enough money for a down payment. Some great examples of side jobs are dog walking, driving for Uber and/or Lyft, and babysitting.
Check with Relatives & Close Friends
Perhaps there’s a relative or close friend who may be willing to give you money for a down payment. Many first-time buyers use gift money from parents, grandparents, or other relatives to fund their home purchase.
Get More Ideas
If you’d like more information or ideas on ways to save as a first-time homebuyer for a down payment, just reach out! We’d be happy to help in any way we can, whether that’s brainstorming ideas or getting you started with your application!