If you want to buy a house, then you need to be able to afford the down payment. This is a large sum of money that you need to pay right away that won’t be included in your mortgage. You can technically borrow the money for the down payment, but that would only increase debt.
Sensible people who want to buy a home save money for the down payment. This is a percentage of the whole price of the house. So the down payment will vary depending on how pricey you want your first home to be. It’s recommended to first calculate the amount you need. The down payment is minimally about 20 percent of the mortgage. You can make the calculations based on that or have real estate agent make the calculations for you.
One you know how much you need, here are several suggestions for saving the money you need:
Keep the Money in “Safe” Forms of Investment
It’s your down payment, so you can’t risk losing the money to market volatility. Therefore, you will need to have your money in low-risk forms of investment such as savings accounts and certificates of deposit. Saving is the best way to make sure the money would be available when you actually need it. Certificates of deposit have higher interest rates than savings accounts. However, you can’t withdraw the money anytime you like. If you are getting a CoD, make sure the timeframe is for less than two years.
Try Investing to Increase Your Income
You can consider increasing your income by investing in stocks and bonds. But don’t risk too much of your income in the stock market. Buy cheap penny stocks and compound short amounts of cash into considerable returns. Consider this type of investment an additional source of income. Do not put your savings in the stock market. If you have additional income you want to compound, you can try stocks. For example, instead of spending twenty bucks on movie tickets, you can try your hand buying cheap stocks. You might have a hundred dollars at the end of the quarter.
Find an Additional Stream of Income
Obviously, if you make more money, you can save more. In addition to your day job, consider looking for extra sources of income. For starters, you can sell unwanted clutter at home online and make several hundred dollars. You can also try freelancing online on the weekends to increase your monthly revenue. If you are talented in arts and crafts, you can make things and sell them online to earn additional income. Think of innovative ways you can make more money and save it towards your down payment.
Learn to Live Frugally
Lavish spending and saving do not go hand in hand. When you are saving for a down payment, you will have to cut back on unnecessary expenses. Make a household budget to optimize your savings. Take note of all your expenditures so you know where you might be wasting money. For example, do you spend perhaps a lot eating out at restaurants each week? That may be a luxury expense you need to temporarily eliminate to compound your savings.
Use the above suggestions to save up for a down payment in a given time period. In a year or two, you will be ready to become a homeowner, finally.