Saving For A Down Payment


With rising home costs, and typical down payments ranging between 3%-20%, it is becoming increasingly difficult for people to save for a down payment. While several programs are allowing down payments under 20%, many of these require the buyer to purchase mortgage insurance, which protects the lender from the homeowner defaulting on the mortgage, but has no additional benefit for the buyer. If a home buyer opted to save the 20% to avoid the mortgage insurance on a $100,000 home, the down payment would be $20,000. Now say the buyer saved an average of $200 per month for a down payment, it would take over 8 years to save the $20,000! Now I don’t know about you, but when I decided to purchase my first home, I didn’t say, “I want to buy my first house in 8 years,” and I certainly didn’t start saving when I got my first job. However with a little patience and a few sacrifices, any down payment goal in a reasonable amount of time is attainable. Below are a few of my tips for saving.

-        Find Affordable Alternatives

∞      Work out at home and drop your gym membership

∞      Buy a nice latte machine and skip the line at the coffee shop

-        Turn your hobby into a side job

∞      Sell your crafts on etsy, ebay or have a yard sale

∞      Put yourself on taskrabbit. The site helps you hire yourself out to do household chores for locals

-        Make it a fun competition

∞      Challenge your spouse, friend or neighbor and see who can save the most money each month

-        Reward yourself when you hit a milestone

∞      Don’t wipe out your savings, but buy yourself that pair of shoes, or the book you’ve been wanting. You deserve it!

-        Grow your savings

∞      Once you have a chunk in your savings account, consider moving the funds into a high yield savings account, certificate of deposit, mutual fund, or peer to peer lending to increase your rate of return. Get solid investment advice if you are considering riskier investments however. If you’d prefer to play it safe while increasing your return, consider the certificate of deposit.

-        Shop around for your major monthly expenses

∞      Consider switching your cable, internet or cell phone plan, or switching companies all together

∞      Talk to your insurance agent. You could be paying too much for your car insurance, when you could be putting that extra dough toward your down payment

-        Pay with cash

∞      Save money by not paying interest on your credit card

∞      Turn it into a savings game. When you pay with cash, every time you get a $10 back in your change, put it in your savings fund.

-        Set an automatic deposit into your savings

∞      You won’t have to lift a finger, and you won’t ever see it, so you won’t miss it

-        Shop Smarter

∞      When you go shopping, make a list of everything you need for the week. Stick to your list and don’t impulse buy

∞      Don’t go grocery shopping hungry. You will be more likely to buy items on a whim because you are hungry

-        Consider changing your commute

∞      If you have errands to run that are close to home, or even work close to home, consider walking or riding your bike. You won’t have to fill your gas tank as quickly

-        Put any tax refunds, bonuses and gifts directly into your savings

∞      This is the fastest way to grow the balance in your savings account. If you are averaging $200 per month in your savings, but twice per year put $2,200 in your savings, you could reduce the amount of time it takes to earn your down payment by months or even years!

-        Skip the vacation and opt for a stay-cation

∞      This one is the most difficult in my opinion. We work hard all year long for that relaxing week on the beach, on the mountain or in the woods with no distractions and no worries. But, it is mighty costly. Instead, opt for a vacation at home and camp in your front yard. It can but as relaxing, I promise!

-        Consider moving

∞      You could be paying an extra couple hundred dollars for extra square footage you don’t use. Consider moving into a smaller apartment, or even shacking with family until you’ve saved up enough to buy that dream home

-        Create a budget

∞      Write down what income and expenses you have each month, and create a plan for you money. Know exactly how much money is going out in bills and how much you plan to save each month. Stick to it!


These are just some of my tips for saving money for a down payment on your dream home. It is not an easy task. It takes a lot of patience, a little sacrifice and a pinch of planning. Don’t be afraid to utilize government programs, gifts from family or ask for seller’s assistance. Putting down less than 20% might be the right solution for you. Talk to a home loan expert, and see what options might be right for you.