For most Americans, buying a home is one of the biggest purchases they’ll ever make in their lifetime. So it makes sense that, to cover the down payment — the most substantial of the up-front costs when securing a mortgage — saving up ahead of time is a commonly employed tactic. In fact, according to the National Association of Realtors, 47% of homebuyers use savings to cover the down payment on their home purchases.
Are you and your family planning to buy a home in the (hopefully) near future and looking for ways to save up the funds needed for your down payment? Consider these six highly effective strategies for setting money aside so that you’ll have it at the ready when you find that perfect property:
- Determine your down-payment needs: While it’s a commonly held belief that a 20% down payment is needed to secure a mortgage, few lenders actually require a down payment that large. (The 20% amount is common, though, because this is the level at which the need to purchase private mortgage insurance is typically waived.) For those with regular income, good credit and manageable amounts of debt, many lenders will allow the buyer to borrow more funds and lower the amount of money needed for the down payment.
- Create a savings-specific account: For most consumers, moving the money being saved up for a down payment into an account that’s separate from the one typically used to cover bills and day-to-day spending (usually a checking account) can help reduce the temptation to spend the funds. A few popular options to consider here include savings accounts, money market accounts and certificates of deposit.
- Cut down on costs: Nearly all of us make unnecessary purchases — at least from time to time. And whether it’s a subscription streaming service we rarely use, a gym membership that goes untapped, regular visits to the coffee shop or frequent meals out at restaurants, these all represent opportunities to dial back our spending. Other common ways to save include comparison shopping before making big purchases, using coupons and finding ways to save on vacation, just to name a few.
- … and step up your savings: Of course, all the money saved by pursuing the steps outlined above can be contributed to your savings goals. But those are far from being all the possible ways to bulk up your savings. Additional savings can be generated by employing smart financial moves such as making savings automatic with automated money transfers from your checking to your savings account and stowing away windfalls such as a tax refund or a bonus in your paycheck. Other saving-savvy moves include utilizing a cash-back credit card for most of your expenses and paying off the balance each month, as well as stashing spare change by using money-saving apps such as Acorns.
- Consider debt consolidation: Especially for consumers who carry significant amounts of credit card debt, the monthly interest accrued on these debts can be substantial — particularly when the debt holder makes only the minimum payment each month. But with a debt consolidation loan, consumers can borrow the money needed to pay off/eliminate such high-interest debts in exchange for a single debt — often with a much lower interest rate and typically a fixed monthly payment. In doing so, such consumers can both simplify their monthly bill payments and save money.
- Access available assistance: A number of government-supported programs have been designed specifically to help homebuyers — and especially first-time homebuyers — get assistance with attaining and affording their mortgages. Among them, various federal programs, state programs and local programs can go a long way toward bridging the gap for homebuyers who need help buying their primary residences. And here in the Palmetto State, the South Carolina First Time Homebuyers Program can help first-time homebuyers lower the amount of money needed for their down payment, as well as avoid other potential hurdles to home ownership. Before taking out a mortgage, be sure to find out if you may qualify for homebuying assistance.
More helpful homebuying resources
Looking for more details about the homebuying process? Check out the First-Time Homebuyers’ Road Map on the Arthur State Bank website today! It offers a rough timeline of the steps involved in the process, along with additional information about each one.
The Arthur State Bank Mortgage Calculator is a helpful tool for prospective homebuyers looking to find out how much home they can afford. And when you’re ready to start a mortgage application, perform a mortgage rate search, find a loan officer, or access a range of other critical information or resources related to the homebuying process, visit the Arthur State Bank Mortgage page and/or the Arthur State Bank Mortgage Web Center.
Proudly serving South Carolina since 1933, Arthur State Bank offers accounts and services to meet a variety of financial needs. To help you achieve all your financial goals, the bank offers in-person service as well as a range of convenient digital solutions. To learn how Arthur State Bank can help you with banking needs ranging from checking and savings to retirement accounts, mortgages, other personal loans and more, visit arthurstatebank.com.