As a mortgage broker, one of the biggest hurdles that many home buyers face is saving up for that big down payment. This alone can often put people off of buying a home. It doesn’t help that there are many myths about mortgages, such as you can’t buy a home without a 20% down payment. This isn’t actually the case though. Many homes can be bought with as little as a 5% down payment. If you are looking for ways to start saving for that down payment, here are some tips.
Visit a Mortgage Broker First This is an important first step because it will help to determine how much you can afford and what options are available in regard to a down payment. The amount that you will need to save will vary greatly depending on each lender, as well as your credit score. Our brokers are able to pull your true credit score for you to advise you on how much of a down payment you will likely need. You can do this months in advance to give you more time to save and clean up any credit issues.
Open a Dedicated Savings Account As an Alberts mortgage broker, my advice to new home buyers is to open a savings account specifically for your down payment. Make sure there are no checks or debit cards linked to it. You can then transfer a certain percentage of your monthly income into this account regularly.
Get an Automatic Savings Plan An automatic savings plan will help you save by rounding up your dollar amount on any purchases you make. It then puts this into your designated savings account for you. This is a good way to save without having to think about it.
Create a Budget Creating a budget is a must if you want to start saving for that down payment. A budget will help you determine exactly how much money you will have leftover after paying the necessary bills each week or month. It’s that leftover money that will go into your savings. Having a budget also helps you to make smarter decisions regarding how to spend what is left over.
As a side note, creating shopping lists of what you need and then sticking to it is another way to help you save. This way you aren’t making impulse purchases when you are at the supermarket, buying “sale” items that you don’t really need.
Cash Instead of Credit Using cash instead of credit for your day to day spending is a great way to make yourself aware of just how much you spend. It will mean that you are less likely to splurge on things that are not necessary. That money that you don’t waste on unnecessary purchases can be put into your special savings account to help build it up more.
Set Realistic Goals One mistake I often see as a mortgage broker is that people tend to focus on that big number that they need to reach when saving for a down payment. My advice is to stop focusing on the big figure and break this down into smaller, more realistic amounts. It’s easier to see how much progress you are making when you focus on saving $100 at a time. That $20 or so will seem like much more in comparison to focusing on $1,000.
Save Extra Income If you get unexpected cash or bonuses, put that into your down payment savings fund. Whether it’s money you were given for your birthday or an unexpected small lottery win, every little bit helps you on your road to saving up for that down payment.
Saving for that down payment doesn’t have to feel like a huge hurdle to get over. Give your trusted local Mortgage Broker a call today and I’ll help get you started on saving for that down payment.