If you’re prepared to transition from being a renter to becoming a homeowner, you may be wondering about effective ways to save up for your down payment, a concern shared by many prospective buyers across the United States.
In a time when rental costs are soaring, setting aside any funds as a renter can be quite challenging. Given the current dynamics of the housing market and the relatively low mortgage rates, opting for a monthly mortgage payment can be a more economical choice in certain regions, making homeownership an appealing prospect. It’s not surprising that half of all renters (50 percent) are contemplating the idea of purchasing a home, with 18 percent giving it serious consideration, according to the Zillow Group Consumer Housing Trends Report.
Are you a renter wanting to become a homeowner, but not sure how to come up with a downpayment? Here are several innovative strategies to expedite your savings for your future home purchase:
1. Conventional Savings
With careful planning and patience, the step-by-step approach of saving up can be a highly effective method for funding your down payment. According to the Zillow Group study, this was the most common method employed by the majority of buyers for their down payments in 2017.
However, the traditional savings route isn’t always straightforward, and most importantly, it demands time. If you’re eager to become a homeowner, waiting several years to accumulate the necessary funds can be discouraging. Additionally, in some tight housing markets, the down payment requirement can fluctuate as home prices surge, making it a moving target.
2. Sell Unwanted Items
Regardless of the season, it’s always an opportune time to declutter your living space. Selling old clothing, furniture, or electronics that you no longer use can generate substantial cash and help you tidy up your surroundings. Depending on the items you’re selling, various online platforms can connect you with potential buyers. If online selling isn’t your preference, consider hosting a garage or yard sale.
3. Cut Back on Expenses
Do you truly require the extra 60 channels in your cable package? Can you downgrade your internet speed? Are there subscriptions you can do without? While these adjustments may not be ideal, when you’re striving to buy a home, you might need to make certain concessions to save money more rapidly. Trimming your monthly automatic payments can accelerate your savings, provided you set aside the saved money to prevent it from being spent.
4. Embrace a Smaller Lifestyle
Although it may entail a challenging few months, downsizing your living space, and consequently, your monthly rent payments, can help you accumulate more money each month for your down payment. Transitioning from a one-bedroom apartment to a studio or switching from a house rental to a smaller apartment can expedite your savings more than you might expect.
5. Reduce Discretionary Spending
Happy hours after work and weekend trips to the movies are enjoyable, but cutting back on discretionary spending is an easy way to bolster your savings. Instead of going to the cinema, consider renting a movie at home or watching one from your existing collection. If you miss the social aspects of going out, invite friends over for a game night.
A useful tip for spending less during the month is to attempt a spend-free weekend. Dedicate one weekend each month to avoiding any expenditure. You might be surprised at how much you typically spend in a single weekend, and how quickly these savings can accumulate when you opt for staying in.
6. Crowdfunding
Beyond trimming your personal expenses, you could explore the possibility of financing your down payment through crowdfunding. Many homebuyers have successfully sought financial contributions from friends and family, diverting gifts from occasions like weddings, birthdays, or other celebrations toward their down payment. Whether the funds take the form of a loan or a gift without the need for repayment, seeking assistance from loved ones can be a viable means to ensure you can afford your down payment.
7. Explore Earning Opportunities Creatively
If you’re willing to invest some extra effort on weekends or after your regular work hours, securing a side gig could generate additional income. Consider options such as dog walking, waiting tables, house-sitting, or selling handmade crafts online or to colleagues and acquaintances. Alternatively, you could brainstorm more inventive income streams.
If you have a spare room or even a couch, there’s potential to earn money by renting it out for a night or longer stays. Additionally, renting out a parking spot in your driveway, if available, can be lucrative depending on your location, as parking spaces can be in high demand. It’s not just parking spaces; people may also be interested in renting garages or sheds, so consider these possibilities if you have such spaces available to you.
8. Automate Your Savings
Take advantage of technology and set up automated savings transfers. Many banks and financial institutions offer the option to automatically transfer a portion of your paycheck into a dedicated savings account. By doing this, you ensure that a portion of your earnings goes directly into your down payment fund before you have a chance to spend it on other expenses. This “pay yourself first” approach can be an effective way to steadily build your down payment over time without having to actively think about saving each month. You can start with a small percentage of your income and gradually increase it as your financial situation improves. This automated savings method can make the process of saving for your future home more seamless and less stressful.
