How to Start Saving Money to Purchase Your First Home

Buying a home is one of the biggest investments you’ll ever make. A down payment is typically required for mortgages, and saving for one might be challenging. So here are some tips to help you figure it all out.

What Is a Down Payment?

Purchase your first home — When purchasing a property, you must bring cash to the closing table as a down payment. For your lender, your down payment serves as insurance. Lenders favor working with clients who have formally invested funds from their personal accounts.

This shows your lender that you are committed to your purchase and have the resources to make your mortgage payments by saving enough for a down payment.

With a large down payment, you can choose a shorter mortgage term and pay off your debt more quickly because your monthly mortgage payment will be smaller.

How Much Should I Save for a Down Payment?

There’s a misconception that says you should set up 20% of the price of the house you want to buy. However, this isn’t always the case. The best course of action is to speak with your mortgage lender to determine whether you can put down less money. However, a reasonable place to start is to strive for between 10% and 20%.

After you’ve saved for a down payment, you should also figure out how much you can afford to spend each month toward your mortgage. The basic rule is that your monthly take-home salary shouldn’t equal more than 25% of your mortgage payment. You won’t be able to comfortably live and be prepared for emergencies if your monthly payment takes up too much of your income. To calculate this amount, use any mortgage calculator you may find online.

​​How to Save for a Down Payment

Set up a Down Payment Fund

Create an account to keep that money in once you have determined how much you should save each month. Keep your down payment funds out of your usual bank account to avoid mistakenly spending them. You might think about a savings account that pays interest because saving money could take some time.

Trim Your Budget 

Find ways to save each month and add the funds to your down payment fund.

Ways you can save:

• Pack your lunch instead of eating out
• Make coffee at home
• Cancel subscriptions and memberships (like gym memberships, cable, grocery delivery, etc.)
• Skip your annual vacation
• Move into a cheaper apartment or home
• Bike or walk to work
• Put your retirement savings on a temporary hold

Make Extra Money

You might earn extra money to add to your down purchase fund by taking on a side job. There are ways to make quick money to increase your down payment savings as the gig economy continues to grow (rideshare, delivery service, pet sitting, etc.). If your full-time employment is the standard Monday-Friday schedule, many businesses will additionally hire you just for weekend work.

Saving for a Townhome at The Cloisters of West Tawakoni

Ultimately, you know the ways you can cut your expenses and earn a little extra income. We are happy to refer you to a lender that can help you get on the right path toward saving for your new home at The Cloisters!

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