Buying a home is a huge step in life and begins with a huge hurdle: the down payment. Fortunately, by starting early and thinking things through, you can get a solid jump on saving. Here are some easy ideas to get you started.
Automate Your Savings
At your usual financial institution, open a savings account specifically designated for your down payment/mortgage. Not only will this allow you to conveniently transfer funds from one account to the other, it will also allow you to automate transfers or directly deposit part of your paycheck into the specified account.
Make a Budget
Create a spreadsheet that lists all of your monthly expenses and monthly net income. Not only will this tell you how much you can put into savings, it can also help you discern what monthly mortgage payment you can afford. If the buffer between expenses and income is already too small, this is an early red flag that you will have to start doing some things differently to afford your mortgage.
�Given that income and expenses are closely matched in many households, the only way to get ahead is to bring in more money or change your spending habits (meaning spend less) and avidly look for new savings sources,� says Peter Miller, The Simple Dollar contributor.
Invest Your Funds
If you are looking to buy a house within the year, Kathryn Vassel of CNN Money recommends keeping your money liquid; but if your plans are more long-term, it is a good opportunity to invest in order to boost savings. If you are looking at a 10-year time frame, stocks could be a good option for you, Vassel writes. If you think you�ll buy a house in five to seven years, consider investing in bonds: 50 percent in longer-term bond funds or individual bonds and 40 percent in short-term bonds that mature in one to three years, plus 10 percent in cash. Finally, try higher-interest CDs if you are still two to four years from buying a home.
Research Home-Buying Programs
One of the first steps toward saving for a mortgage is setting a goal. A general rule of thumb for the down payment is 20 percent of the home�s selling price, but many available government programs also offer lower down payments, down payment loans or grants, or housing discounts. For lower down payments, look into GSE loans or loans through the FHA, VA or USDA.
Whether you choose one of these savings methods or all of them, they will help you come up with the down payment for the home you�ve always wanted.
