It’s been awhile since we talked about money on here. For good reason, too. We sold our house, moved across the country, and spent a lot of money in the process. It’s not a cheap thing to do (although, we definitely found ways to save along the way), especially when your previous house had lots of problems that needed to be fixed before the sale finalized. I’m thankful for the emergency fund that we had established before we moved, because before it was all said and done, that fund was almost gone and I may have been panicking a little. It’s been 6 months since we made the move to Oregon, and that house is no longer our burden, praise the Lord. Since then, we’ve had a few things on our mind (mostly mine): establish a 3-6 month emergency fund, and then start saving like crazy for a house. We rebuilt our emergency fund fast, and now we’re saving for that down payment. Our goal is at least 10-20%.
While it is recommended to have 20% down (and I really hope we can get there), the housing market where we are in Oregon is insane, and a three bedroom house will cost you at least $300,000, and it will probably need a lot of updating. So, we will probably need to increase our budget, so the bigger the down payment, the more we could afford. We plan to buy a house that is affordable, with the monthly mortgage payment and taxes coming in around 20-25% of our monthly take-home income. We feel that is a good, safe goal. Most people recommend spending 25-35% of your monthly income on your mortgage payment.
I want to share with you how we plan to save for a down payment fast! We plan to start looking in 10 months or so and are just starting to save now, so every extra penny will be going towards our goal.
First things first. Before buying a house you should:
- Have your 3-6 month emergency fund built up. This is SUPER IMPORTANT! Something we’ve learned from experience. The unexpected will happen. Like when we had to replace all the electrical in our house even though it passed during the inspection. Thankfully, we had the money and got a discount because we just handed the guy $5,000 in cash when he had finished the job.
- Get out of debt. Sorry to be a big bummer here, friends, but buying a house with other debts can be a huge burden. It’s nice not to have your money tied up in debt when something unexpected comes up (see example above). Check out how we got out of debt here.
How To Save For A Down Payment Fast
Budget: This is a no brainer, but you need to know how much money is coming in, going out, what your spending habits are, and where you can save. There are many great budgeting apps out there to make life easier: YNAB, Every Dollar, and Mint to name a few. STICK TO IT! Super hard I know, but the better manager you are with your money the more you can save. Many people say that they end up saving a ton of money just from budgeting. When you can see where your money goes, it allows you to make changes, change behaviors, and waste less money. Budgeting gives you control over your money.
Figure out your goal: How much money do you want to save and in what time frame? Look at the real-estate market, figure out how much you can afford to spend on a house to fit your budget, and then figure out how much of a down payment you will need. Dave Ramsey has a great calculator to see how much of a 15 year mortgage you can afford. If you do plan on going the 30 year mortgage route, try Smart Asset’s mortgage calculator.
The higher the down payment, the lower your mortgage payments, plus the less interest and PMI you would pay if you just financed it all. Be realistic with your goal, but also stretch yourself. Take the amount you need to save (i.e. $30,000) and divide by when you plan to buy a house (i.e. 18 months): 30,000/18mo=$1,666.67 per month). I like a good challenge, so our goal is definitely stretching us, but I try my best to make it happen anyway possible. If you don’t reach your goal every month, give yourself some grace and don’t give up. Some months you may be able to beat your goal, and some you may not make it. It’s all good.
Create a house savings account: This is a great way to track just how much is in the house savings and how much further you need to go to make your goal. Better yet, place it in a high yield savings account like Capital One 360 Savings account (offering 0.75% APY) or Ally Bank (offering 1.05% APY). Compare that to my credit union’s 0.05% APY, and there are hundreds of extra dollars difference you could be earning without doing much.
Automatey your savings: Have part of your paycheck direct deposited into your house savings account every paycheck.
Makes some cuts: Where can you save money? Stop going out for coffee, eat out less or not at all, switch your cell phone to Republic Wireless (they offer smart phone plans starting at $5), pack your lunch, ride your bike more, cancel gym memberships, pull the plug on cable, etc.
Check out 90+ Ways To Save Money for more ideas!
You may have to get a little drastic depending on your goals and how soon you want to meet them. For instance, instead of paying for a haircut, I’m just waiting until I see my mom next for her to cut it (it’s been almost 6 months since my last haircut, and myself or my mom always cut my husband’s hair). This alone saves us close to $250 a year. Anything you can do to cut costs.
Bring in extra cash: Side hustling is a great way to amp up your savings. You can get a second job working weekends, become a freelance writer, or start a side business selling your services (i.e. tutoring, lawn care, babysitting, cleaning houses, etc.). Or, my favorite way to earn extra is through blogging (see How To Start A Blog here)! All of the money I earn (after expenses) from this blog goes straight into savings. We are super blessed to still be getting paid through my husband’s old commission-based job. This money won’t last forever, so we are trying to save as much of it as we can now and just live off of my husband’s new job income right now.
Sell stuff you don’t need: Have a garage sale, sell things on Craigslist or eBay, and put the money you make into your house savings account.
Save your $5 bills: Every $5 bill you come across, put it in your house savings account. You would be surprised how it adds up.
Have a no spend month (or a few): Put all extra money into your house savings. You can find out more about a No Spend Challenge here.
Put any extra money towards your goal: This includes birthday money, Christmas money, anniversary presents, random checks that just come in. If you really want to hit your goal sooner rather than later, put this extra money to work. We recently got a $80 rebate from something and a $25 check from insurance, both went right into our house savings. Hello random $100, you’re my favorite.
Temporarily reduce your contributions to your retirement: Sayyy what? I have even heard Dave Ramsey say this, so I’m not crazy, yo. But if you really want to get crazy to save your down payment fast, then you may think about reducing or stopping your retirement contributions temporarily. I’m saying a year or two, tops. Then resume your retirement savings and try to max it out.
Cash In Some Vacation Time: If you are able to, why not cash in some extra vacation time to earn a few more bucks. At my husband’s new job they allow him to do this and there is no doubt that we will be using this to go towards our down payment. And we still plan to go on a few vacations. We will be using weekends and traveling near by (got to explore this amazing new state we live it)
What are your favorite ways to save money?
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