So you decided you want to buy a house. Congratulations!
You know where you want to live. In fact, you’ve already mentally moved in.
But there’s one problem: You don’t have any money for a down payment.
Chances are when you purchase your home, you’ll have to bring some money to the table for a down payment. If you haven’t began saving for a down payment, here are five simple ways to help you accumulate the money.
Understand How Much Money You Need
As the leadership author Stephen Covey wrote in his popular book 7 Habits of Highly Effective People, “Begin with the end in mind.” This simply means you should know how much money you need to save for your down payment before starting the process. To get a clearer idea, you’ll find it helpful to speak with a real estate agent. This discussion should uncover what type of home you are looking for. By having this conversation, the real estate agent should provide an estimate of how much your home will cost as well as how much you’ll need for a down payment. Depending of the type of loan and lender, down payments are usually expected to be between 3.5 percent to 20 percent of the home’s purchase price.
Track Your Spending Like a Hawk
When you have a financial goal you’re saving for, understanding where every penny is spent each month is crucial. Review your spending from the previous two to three months. You will identify areas you can cut back on spending. Maybe it’s dining out or shopping. If you need help tracking your spending, try free web-based programs like Mint, EveryDollar or BudgetSimple. The process of cutting back on frivolous spending will help you accelerate your savings and get in your dream house sooner.
Earn Some Additional Money
In addition to spending less, earning additional money is a great way to fund your down payment. Now is a good time to speak with your employer about a raise (if you can justify it). If you want to earn money on the side, there are several ways to do so. In fact, the internet has made this easier than ever before. Website like Elance.com or oDesk.com, for example, connect freelancers to people all over the world looking for a variety of services. Opportunities range from graphic design, virtual assistant, writer, transcriber, bookkeepers and lots more. If you’re more comfortable with the traditional methods, consider things like tutoring, babysiting, cleaning and other services that can increase your savings.
Find Ways to Stay Motivated
The process of saving for a down payment may be frustrating. Depending on how much you have to spend, sacrificing time and energy for a long period of time for this goal can be uncomfortable. Finding ways to let the ultimate goal motivate you will give you the kick in the pants you need when you’re ready to give up. Create a vision board of ideas of the type of home you want and decorating ideas can keep you motivated through your journey. You can clip pictures from magazines to post on your vision board or create a board on Pinterest.
Create Mini-Milestones and Celebrate Them
The final number you’re trying to save for a down payment may seem unreachable. It’s easy for counterproductive thoughts to creep into your mind. Those moments of doubt can create an unwillingness to continue saving for a down payment. So why not create mini-milestones and give yourself a reason to celebrate when you hit each one? For example, if you need to save $20,000 for a down payment, find a way to celebrate every time you reach $4,000 or $5,000. Treat yourself to dinner at your favorite restaurant or go get massages when you reach that number. This approach will eliminate the possibility of getting bored for losing focus while on the down payment savings journey.
photo credit: Money