Saving up for a house can take a lot of work. With the median home price floating at $375,000, a 20% down payment amounts to $75,000. You can put down less, but in today’s competitive market, more cash upfront can help make your offer stand out.
Among younger homebuyers, 30% say that gathering enough for a down payment is the most challenging step in buying a home. Yet as challenging as it may be to get the money, there are plenty of strategies that can help you get there faster. Here are some ideas that our team at Corken + Company felt helpful for any trying to save for a home!
1. Start a house fund—and pay it first
Regardless of how you try to save, funds in your checking account sometimes have a way of disappearing. To keep this from happening, it can help to set up a separate savings account for your down payment. While you can transfer money from your checking account to your house fund, an easier move is to automate these payments regularly. A smart idea may be every two weeks, if that’s when you get paid by your employer.
2. Keep your house fund in a safe, low-interest-bearing account
Once you have a house fund going, you might be wondering how to keep it growing, while you are looking for the right house. After all, inflation is at a 39-year high, at 7%.
So does that mean you should invest your house fund in stocks to keep up? As logical as that may seem, no. Stocks do go up, but they can also go down—and what if that downturn happens right as you’re ready to make an offer?
“Anytime you want access to your money in the short term—one to two years or less—you should consider a high-yield savings account,” says Jay Zigmont, a certified financial planner and founder of the financial planning firm Live, Learn, Plan. You won’t make much interest on your savings, he notes, but the money will be there when you need it.
3. Turn your rent into a down payment
An option geared for renters is Bilt Rewards. This app, turns paying rent on time into “points” that can then be turned into cash you put toward a down payment. (They also have a Bilt Mastercard.)
Bonus: This service can help you build your credit score, which lenders will check to see how reliably you pay rent.
4. Search for local down payment assistance programs
Many local governments offer down payment assistance programs and grants. These are often income-based, but some provide forgiving loans for improving run-down properties. Some also offer financial assistance for teachers, firefighters, health care workers, and other professions.
5. Check your withholding taxes
If you get a tax refund every year, you can consider lowering your exemptions and taking more cash. Sure, you won’t get that fun refund in the spring, but the extra money you will receive can go toward your down payment.
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