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Helpful tips to keep in mind when saving for a down payment

Piggy bank with calculator

For most of us, owning a home is one of the biggest dreams. It’s also the biggest investment most of us will make within our lifetimes.

The gravity of having such a significant financial decision makes purchasing a home seem a bit intimidating. But like most situations, taking that first step is key. In this case, it’s saving enough to cover a home’s down payment.

How much should you save?

Ideally, a buyer should save money up to a 20% down payment in order to gain equity in the new home from the start and to avoid the added cost of mortgage insurance, but it can turn out to be a very difficult task.

While 20% of the purchase price is a good goal to have, it’s not really a requirement. In some situations, placing a smaller down payment can be a better option. Try to make a decision that works for both short-term and long-term plans.

Open a savings account dedicated to your down payment

You can start by creating a separate savings account without checks or linked debit cards, and use this specifically for your down payment savings. Try to deposit a certain amount each month or whenever you can from your income into the account.

Set realistic goals

Keep in mind that even small amounts add up. Instead of trying to target a large amount to save up to, break it up into smaller amounts that are more manageable. For example, try to focus on saving just $100, and repeat the process. This will help put things into perspective for you, and will help motivate you towards saving for a larger amount, as any amount you save feels like an accomplishment.

Create a budget

One of the best things you can do to save money is to figure out how much money you have left after spending on necessities. This will be the money that can go towards your savings. Determine how much you need for necessities each month and make smart choices on what you can do with whatever amount you have left.

Spend using cash instead of your credit card

Try to use cash whenever possible instead of your credit card. This will make you more conscious of how much you’re spending, discourage you from splurging on unnecessary things, and ultimately keep more of your money in the bank, which you can use towards your down payment.

Think before you spend

Saving for a down payment doesn’t mean you have to completely avoid spending your money on things you enjoy like going to the movies, shopping, or travelling. However, it does mean that you need to carefully consider every purchase, as each one can take you a few steps back from reaching your goal. For large purchases that don’t count as necessities, remember to take some time to think about whether or not it’s worth it.

Want to work with the best real estate agents in the Coachella Valley? Get in touch with California Lifestyle Realty today at 760-564-1200, or send an email to info(at)califestylerealty(dotted)com.