You may be renting right now but maybe owning a home is your ultimate goal. You know you’re ready to put down roots in the community and stay for the foreseeable future but you’re struggling with the idea of saving for the down payment. With the high cost of rent in the Bay Area, saving enough for a down payment can be daunting but it’s possible!
With some planning, your dream of owning your own home can become a reality. Here are some ways you can save for a home while renting.
Figure out your need
The first step to saving is knowing how much you need. While a 20% down payment is recommended, it’s not required. Depending on the type of loan you have, you may be able to have a down payment as low as 3%*. Research how much homes are selling for in your desired area, how much you can afford, and any programs you may be qualified for, especially if you’re a first-time homebuyer. Understanding the costs of buying a home will allow you to set an accurate savings goal.
Review your current finances
Your next step is to review your current financial situation and understand where your money is going. Make note of your current savings, write down any debt, and the amount owed, including the interest rates, and your monthly expenses for the past six months. Once you know where your money is going, you can create a budget that works for you. Understanding where your money is currently going will allow you to find places you can cut back on without feeling stifled.
Pay off debt
Eliminate as much debt as possible, especially any high-interest debts like credit cards or personal loans. These kinds of debt can make it harder to save. Create a debt payoff plan, focusing on your highest interest debt first. As you pay off each debt, you can use the money you were spending on that payment towards paying off your next debt.
Automate your savings
As you make progress on your debt paydown, don’t forget to set money aside! It’s easy to forget, so make it easier by creating an automatic transfer with your bank. That way you can be sure your savings goal is getting funded.
Open a high-interest savings account
Maximize your savings by opening a dedicated high-yield savings account for your down payment. Each bank offers a different interest rate so shop around for one that offers the highest rate – just be mindful of any minimum balance requirements. If you tend to dip into your savings, this dedicated savings account can keep you from tapping into it too soon.
Stash cash windfalls
Most people receive a tax refund each year. Instead of spending it, put that money into savings. The same goes for any raises you may get. Continue living at your old income level and transfer the extra money to your savings each month.
Scale back your spending
Look for ways to spend less, whether it’s eating out, going to the coffee shop, or shopping less often. Grocery shop with a list to keep your food bill under control. Check your monthly subscriptions and see if there’s any you can live without for a bit.
Get a side gig
Getting a side hustle is a great way to earn extra cash that can go directly into your savings. From picking up short-term gigs through the gig economy to selling items on Etsy or even freelancing, there are a lot of different ways you can earn additional money.
Saving for a down payment takes dedication, especially while renting, but with some careful planning, you can make it happen. Ready to get started on your home buying journey? Visit us online at DiscoveryHomes.com to learn more about our new home communities throughout Northern California and schedule a visit today!
*Loan programs subject to qualification and approval by Lender. Consult with a Loan Officer for more details. The above data is provided for reference only and is not a representation or warranty by Discovery Realty, Inc. or any of its affiliates (“Seller”). Neither Seller nor its content providers are responsible for any damages or losses arising from any use of this information. Interested parties are advised to conduct their own independent research into loan terms and real estate markets before making a purchase decision.