Most adults of any age know that a house is a long-term investment that comes with long-term costs. Mortgages require monthly payments for several years to even several decades– fixed rate mortgages are commonly either 15 year or 30 year fixed rate loans.
However, those long-term monthly expenses aren’t the only costs that come with buying a house. Even if your current income has room for a new monthly payment, buying a house requires a significant amount of money up front. Down payments for houses vary, but at any price, swinging a down payment takes considerable planning and saving in advance.
If you’re thinking about buying a house, use these tips to get started saving for the down payment, so that when the time comes to start shopping, you’ll be armed and ready for whatever the real estate market throws at you.
- Pretend You Already Have the House
This first step sounds crazy, but hear it out– once you own a home, you’ll need to make monthly contributions towards the mortgage. Instead of sending monthly checks towards the mortgage loan, send a similar fixed amount of money to a specific savings account each month before you buy. Branch Banking and Trust Company writes that starting a savings account specifically for a down payment will help you focus on that specific savings goal. As a bonus, this process will get you used to cutting other expenses in anticipation of a new monthly bill.
- Check Interest Rates
The Simple Dollar warns that credit cards, car loans, and other accounts with unfavorable interest rates could be sapping your income that would otherwise be going towards your future house. Start by paying off credit cards with the highest interest rates, and work your way down to something manageable. If you’ve been paying regularly and on time, you might even be able to simply call the company and ask for a better rate. Some credit card companies will adjust rates to retain a good customer like yourself. By managing interest, you can ensure your money is working for you and not against you.
- Make Use of Windfalls
Another tip from Money Under 30 is to stash sudden large earnings in your down-payment savings. Putting income-tax refunds, gifts, bonuses, and even inheritance money towards your future home will accelerate the time it takes for you to save enough for your dream home.
Stay money-wise and start saving for your down payment early. Using these tips, you can build up funds quickly and painlessly to achieve your homeowning dreams.