If there’s one thing that can help you get approved for a mortgage, it’s a large down payment. Showing the lender that you have a vested interest in the property lowers the risk the lender must take. Putting more money down can help you cancel out negative factors such as a lower credit score or higher debt ratio. Your willingness to put your own money on the line shows lenders your seriousness in buying the home.
What if you don’t have a lot of money saved, though? Here are the top ways you can save that higher down payment without sacrificing too much.
Automate Your Savings
The easiest way to save a large sum of money is to make the saving automatic. If you already have your check direct deposited into your checking account, allow a percentage of it to go into a savings account. Make sure it’s an account you won’t touch, though. This way you won’t have the opportunity to spend the money – it’s not in your checking account, so you will forget about it.
You can put as little or as much as you want in your savings account. We recommend starting out with a small amount that you won’t miss. Then you can gradually work your way up as you adjust your budget to allow for more savings. Before you know it, you’ll have a decent amount of money to put towards your home.
Don’t Spend Windfalls
Windfalls are awesome because it’s a large sum of money that suddenly lands in your lap. Maybe it’s a tax return or an inheritance. There could be hundreds of reasons you get one. What matters is what you do with it. If you treat it with the ‘out of sight, out of mind’ mentality, you can put it right into your savings account and forget you had it. This is the easiest way to bump up the money you have saved for your down payment.
If you can’t handle putting it all away, try saving at least half and doing what you wish with the other half. Don’t forget your long-term goal of saving for a down payment, though. Even though it’s hard, think about how saving the entire amount of money could really push you towards your goal.
Cut Your Monthly Spending
This step could take a little work and sacrifice. We don’t recommend skimping in areas that will really affect your lifestyle. But, try to find little ways you can cut things. For example, you may cut the cord on cable, but subscribe to Netflix or another streaming service. Chances are you’ll save a large chunk of change each month. If you do, put the difference directly in your savings account each month.
Other habits you could change is a daily coffee shop stop, nail salon appointments, or shopping habits. Of course, everyone has to shop from time to time, so try to get into the habit of using coupons. The money you save should be put right in that savings account, though, so you can make the most of your savings.
Consolidate Your Debt
If you have a lot of high-interest debt, consider consolidating it into one big loan. You can consolidate it onto a 0% APR balance transfer credit card or a personal loan, for example. This way you have one loan to pay each month and will hit the principal faster. You will still pay interest, but hopefully it’s a lower rate than the average rate on your multiple accounts.
The key to making this step work, however, is to stop your spending habits. If you consolidate several credit cards, don’t use them again. Put them away in a lockbox or safe so that you have them for an extreme emergency, but not for daily use. This is the only way to keep your bills down and yourself out of debt.
Take a Side Job
Assuming you already have a full-time job, consider a side gig. The internet is full of ways for you to make money, whether you make things, have special skills you can offer someone, or sell things around the house you don’t use anymore. Every dollar counts.
Take the money you make from your side gig and put it right in your savings account. Remember, you aren’t taking the side gig to have spending money every month. You are doing it in order to save for a large down payment for your future home.
Saving for a larger down payment won’t happen overnight. The earlier you start any or all of these habits, the more money you’ll have in the end. Try to be as consistent as possible with your efforts so that you can have top dollar saved for your future home.Click to See the Latest Mortgage Rates»