How to Save up for a Home Down Payment in One Year
Unless you are qualified for a VA loan, you need to save a few grand for the down payment of your soon-to-be home. A down payment, however, can actually be a hindrance for first-time home buyers, since saving up tens of thousands of dollars is not that easy. And considering the fact that the average percentage of down payments for conventional loans is ten percent (10%) of the home's value, your options are either to qualify for an FHA or VA Loan, or start some serious savings plan to get the down payment challenge out of the way.
For a $200,000 home, a 10% down payment can cost you $20,000 upfront. Aside from this payment, you also have to worry about closing fees that you are going to share with the seller. Twenty grand is twenty grand, so are you supposed to live in a car, eat once a day, and work three jobs to meet that humungous financial goal? NOT REALLY. All you need is a reevaluation of your lifestyle and stop spending on the non-essentials. Here are several items you don't need in your life that could just help you save up for that down payment faster.
An average working individual goes to work for 260 days every year. For professionals on the go, signature coffee in attractive to-go packs are just imperative. But that signature coffee will cost you $3.65 every day, so that's approximately $949 every year. Ditching those for fresh coffee brewed right in your own kitchen or at the office can save you approximately $4,745 in 5 years.
Exclusive Gym Memberships
A typical gym membership can cost you around $60 monthly. In a year, that's $720 annually. In five years, that's $3,600. While we are not saying that you ditch your fitness routine altogether, we recommend making use of your creativity to stay fit, stick to a fitness regimen, and use a public park or the resources you have at home to get a great workout.
Premium Cable Subscription
Sure, nothing beats chilling out in front of your TV after a hard day's work, but does chilling out at home equate to you spending an extra $99 a month for your premium cable subscription? If you cancel your subscription and devote your "chill down" time to other just-as-relaxing activity (like watching the local channels of your TV or reading), that's saving worth $1,188 a year or $5,940 for the next 5 years.
Takeout Food for Lunch
Preparing packed food can be a drag, but sometimes, you just need to wake up a few minutes earlier to prepare a packed meal if you are hell-bent on buying a home by being able to afford the down payment. A typical takeout meal costs $11. That's about $2,860 a year, or a whopping $14,300 in five years.
Packed lunch, on the other hand, can cost you as little as $4, or $1,040 annually. That's $5,200 for the next five years-- $9,100 cheaper than eating out at lunch.
If you commit to begin saving up for a downpayment in your early 20s and stick to this regimen, you can actually save up to $23,385 in five years-- just about right for the 10% down payment of a $200,000 home, and with a few grand extra for closing costs.
If your intention is to buy a home before you turn 30, you might want to to consider these budget cuts AND also try to maintain a good credit standing to prepare for the possibility of acquiring a mortgage with lesser required down payment. Some lenders will allow you to pay a smaller down payment if they see that you have good credit, so that's another way to beat the down payment challenge.