Transitioning from being a renter to a homeowner is considered a huge leap. This could mean being promoted to a new role, or that you’re just tired of paying rent anymore. But this is also where most renters and soon-to-be homeowners find difficult--paying for a down payment. It’s even harder when you have no savings to cover expenses upfront.
Five Saving Tips to Help You Pay Down Payments
Here are five saving tips that can ultimately help you prepare for down payments on buying your first home.
- Meticulously Look for An Affordable Apartment
After all, your capability to save can be traced back to your payment as a renter. If you’re paying monthly rent more than you should, it would be difficult to save money. That’s why planning is important. Don’t live in expensive apartments when you are planning to buy your home soon. Don’t buy expensive furniture either. Make sure you’re constantly saving up.
- Deal Credit Cards Wisely
Many people or some financial gurus discourage using credit cards because you could be in bad debt. But that only happens if you don’t know how to handle your finances. One way credit cards can help you pay down payments is by building a good credit score for your mortgage. And the way to do that is by continually using your credit cards for micropayments and paying them on time.
Another thing you can do about your credit score is the ability to borrow quite a huge amount of money from the bank that you can use on your mortgage.
- Cut Back on Unnecessary Expenses
Living below your means by cutting back expenses is the way to go to save up for your first home’s down payment. Trace your spending weekly or monthly to find out where your money goes. For instance, cut expenses by canceling subscription plans you seldom use. Find alternatives that are cheaper. This way, you can save more money.
- Start a Home Buying Saving Account
It’s hard to save money when everything is mixed up. And most of the time, you wouldn’t notice your spending until you ended up taking the money you saved up for the down payment of your dream house. To prevent this from happening, open a savings account that is solely for the down payment’s purposes. Make sure that you constantly put money in this account, no matter how small. Moreover, be clear that this isn’t your emergency fund when things go wrong.
- Investing in Low-risk Investments
When thinking of buying your first home, think of how many years you'll save up to start with the down payment. Investing your money in a low-risk investment can help increase your money’s value more than putting it all in a bank. Every year, inflation is increasing, which means your money’s purchasing power is decreasing. That said, find a way to grow money even when it’s already planned for something.
Final Thoughts
Saving for your first home doesn’t have to be complicated. Make saving a smart habit. Sure enough, down payments can be a terrifying thing when thinking about buying your own home. But that’s how things work in the real estate business. Make sure to also have your separate emergency fund in case things go wrong with your finances, so you don’t have to withdraw any of your savings.
For more information and expertise on rental properties and rental property management in the greater Portland, OR area, visit Illume Property Partners.
References:
https://www.avail.co/education/articles/5-ways-to-save-for-a-down-payment-while-renting
https://www.rentcafe.com/blog/expert-interviews/save-for-down-payment-expert-advice/