Homeownership is not only a great achievement, but a big investment. One of the important things you need to do to purchase a home is to save for a down payment. Typically, a down payment is between 3-20% of the home’s purchase price. Most successful buyers put down between 10-19%. While this may seem daunting, establishing a budget and finding creative ways to save can make it achievable. According to a 2022 Zillow study, 63% of recent homebuyers who secured a mortgage used savings for at least part of their down payment.
The amount you save monthly will depend on your down payment goal. We recommend consulting a lender to help clarify your financial plan and savings timeline once you have a target move-in date.
If you’re already saving monthly, that’s a great start. The more you can save, the quicker you’ll reach your goal. Here are 21 strategies to help you save more efficiently:
1. Create a “new home fund” on your wedding registry
More engaged couples are asking for cash contributions towards home funds instead of traditional gifts. This trend has grown by 55% in the last five years, with nearly 20% of couples on The Knot Registry creating down payment funds.
2. Get a side hustle
Consider additional work like dog walking, babysitting, waiting tables or selling crafts. According to financial planner Bill Promes, even a small side income can significantly boost your savings.
3. Reduce your commuting costs
Utilize public transportation, carpool, bike or ask about remote work options. High commuting costs might justify looking for a job closer to home or one that allows remote work. Alternatively, consider downsizing your vehicle to save on payments and fuel.
4. Pay off high-interest debt
Use bonuses or extra savings to pay off debt. Lowering your debt can free up more money for your down payment by reducing interest expenses.
5. Consider a capsule wardrobe
Minimize your wardrobe to essential items, sell unused clothes and save the proceeds. This can also help declutter your space.
6. Restore and resell
If you have refurbishing skills, buy used furniture, restore it and sell it at a profit. Online tutorials can guide you in getting started.
7. Buy used instead of new
Purchase second-hand goods or join a “Buy Nothing” group. You can find quality items at a fraction of the cost.
8. Avoid unnecessary purchases
Before buying non-essentials, check if you already own similar items. Unsubscribe from email lists that encourage spending.
9. Use the “cash-stuffing” approach
Distribute cash into envelopes for different spending categories. When an envelope is empty, stop spending in that category until the next month.
10. Save credit card rewards
Responsible credit card users can save cashback rewards for their down payment.
11. Cut down on travel
Reduce unnecessary travel and consider shorter or cheaper trips. Many buyers have canceled vacation plans to save for a down payment.
12. Automate your savings
Set up automatic transfers to a high-yield savings account. This makes saving easier and maximizes interest earnings.
13. Downsize your living space
Move to a smaller home to save on rent and utilities. Downsizing can significantly increase your monthly savings.
14. Get a roommate
Sharing your living space can halve your rent and utility costs.
15. Cancel subscriptions
Cut unnecessary streaming services and other subscriptions. About one-third of prospective buyers have done this to save more.
16. Utilize your library
Borrow books and other items from the library instead of buying them.
17. Reduce monthly expenses
Shop around for better deals on essentials like cell phone plans, internet services and car insurance.
18. Buddy up for accountability
Share your savings goals with a friend or partner to stay motivated and on track.
19. Seek affordable entertainment
Opt for free or low-cost activities instead of expensive outings. Hosting game nights or watching movies at home can be fun and cost-effective.
20. Utilize community resources
Engage in free local activities like park games or free exercise classes.
21. Save your tax refund
Allocate your tax refund into a high-yield savings account for your down payment.
By implementing these strategies, staying disciplined and consulting with a real estate agent and mortgage lender to explore loan options and research assistance programs, you can achieve your homeownership goals sooner than expected.
