According to a 2015 BMO Harris report, 52 percent of Americans plan to purchase a home in the next five years. Saving for a down payment, typically between 5 to 20 percent of the home’s value, is one of the biggest if not the biggest challenge for those wishful homebuyers. “A down payment is often the largest single payment a consumer makes in their lifetime and saving for it isn’t easy,” said Corey Carlisle, executive director of the ABA Foundation. “However, with a few changes, consumers can put themselves on track to make their homeownership dream a reality.”
We are highlighting five
tips to help consumers cut back on their spending and start putting money into
savings for the down payment on their first home.
- Develop a budget & timeline. Start by deciding how much you will need for a down payment. Then, create a budget and determine how much you can realistically save – that will help you measure when you’ll be ready to become a homeowner.
- Open a dedicated savings account. Set up a savings account exclusively for your down payment and make a monthly contribution automatically from your check. By keeping this money separate, you’ll be less likely to pull from the account when you’re tight on cash. If you receive a tax refund or bonus, consider putting a portion into this account.
- Check your major monthly expenses. It’s a good idea to check current rates for your car insurance, renter’s insurance, health insurance, cable, Internet or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your current contracts.
- Keep an eye on your spending. Online banking can assist with keeping an eye on your spending. Keep track of where your disposable income is mostly going. Pinpoint areas where you could cut back on spending such as eating out, vacation, etc. and instead put that money into the dedicated savings account.
- Do your research. Many states, counties and local governments have programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.
