9 Ways to Save Money for a Down Payment
Saving money for a down payment on your home may be the most challenging part of purchasing a property, especially if you’re a first-time homebuyer in an expensive housing market. But there are many ways to get over the hump!
Whether it’s increasing your household income, spending less, or reducing your expenses, here are nine strategies that will help you save faster:
1. Ask for a raise.
If you’ve excelled in your work and believe you deserve more pay, it may be worth asking for a raise. Of course, this is not an easy conversation for most people, and it’s essential to plan carefully. But if you’re successful, a raise is the easiest way to improve your cash flow.
2. Transfer into a new role.
Instead of asking for a raise, it might be preferable to apply for a different position within your organization that offers more pay and new opportunities. Since you already have an “insider’s” perspective, you probably know whether the job represents a good move—one that will also enhance your resume and ability to pursue future employment.
3. Find a new job.
If you’ve exhausted opportunities with your current employer, this may be an excellent time to seek a new job with higher pay. Changing jobs might also open the door to moving to or working remotely from a more affordable location.
Just remember that mortgage lenders want to see stable, reliable income for the past two years. As long as your new job reflects a lateral or upward move within the same industry, changing jobs shouldn’t be a problem before applying for a mortgage.
4. Get a roommate.
One of the easiest ways to cut your monthly costs is to rent an apartment with a roommate and split the expenses. If you’re already under a lease, ask your landlord about your options.
There are pros and cons to adding a new occupant to your rental agreement versus using a sublet agreement, including various legal considerations.
5. Stay with your parents.
Moving home may feel like a big step backward, but it can be an excellent, temporary solution. To make it less stressful for everyone and develop valuable homeownership skills, take this opportunity to pitch in on various jobs around the house.
Help your folks maintain the driveway, clean up the yard in the spring, or take care of countless other small but essential home maintenance chores. You’ll feel more prepared to manage your own home, and they’ll hate to see you move out!
6. Eliminate expensive debt.
Since your credit score can impact the cost of your future home, it’s crucial to improve your score as much as possible before applying for a mortgage. Eliminating debt will help. And if you concentrate on paying down the balances with the highest interest rates, like credit card debt, it will free up more money to save for your down payment.
7. Trim incidental expenses.
Sure, everyone enjoys an occasional splurge. But if you’re serious about saving to buy a home, this is an excellent time to scale back on perks. Skip a vacation this year. Eat out less and cook more. Limit your Starbucks runs to once a week. There are countless ways to reduce your discretionary spending.
8. Find and cancel renewing charges.
It’s easy to sign up for a service then forget about it. But if you cancel the ones you don’t use or could easily live without, it can add up to substantial savings. The biggest challenge may be identifying your recurring charges!
Often, automatic billing happens quietly, without notifications. You may need to review months of credit and debit transactions to compile a comprehensive list of fees that renew with or without your knowledge.
Some of the services may reside on your phone or tablet and can be quickly canceled under your subscription settings. But in many cases, you’ll need to visit the provider’s website, place a call, or send an email.
9. Sell what you don’t use.
Most of us have acquired dozens of items that we no longer need or use, adding extra work and stress to our daily lives.
In addition to lightening your load when it’s time to move, strategically eliminating clutter can be an excellent way to bring in extra cash by hosting a garage sale or selling individual items on sites like Nextdoor, eBay, Craigslist, Poshmark, or Facebook Marketplace.