Saving for a down payment can seem like a daunting task. In fact, it’s one of the biggest hurdles we’ve seen keeping renters from becoming homeowners. That, and the belief that a 20% down payment is required when it certainly is not. Did you know that the median down payment in 2018 was 5%?
Below, we’re going to walk through some of our favorite down payment saving techniques. In those examples, we’ll be demonstrating how long it would take to save a 5% down payment on a $200,000 house – $10,000.
Save Unexpected Income
Saving all income outside of your usual paycheck is probably one of the fastest down payment saving techniques. This income could come from bonuses, gifts, a part-time job, or even your tax refund.
Let’s use your tax refund as an example. The average tax refund in Nebraska is $2,615. If you were to save your tax refund for four years, you’d have enough money for a down payment. Don’t have four years to save? Then save your tax refund as a great base and incorporate additional techniques.
Utilize Automatic Deposits
Setting up an automatic deposit to your savings account each paycheck is one of the easiest ways to save. After the initial setup, you won’t miss the money in your checking account because it was never there to begin with.
One budgeting method is to use 50% of your income on necessities, 30% on wants, and 20% on saving or paying off debt. The average income in Nebraska per capita is $30,915, which equates to approximately $2,078/month after taxes. If you were to save 20% of your after tax income each month, you’d save $415/month and $4,987/year. Meaning, you’d only need to save for about two years to afford that down payment.
Try A Saving App
There are many saving apps on the market today, with many of them acting as the online equivalent of a piggy bank. Many of the apps round up on purchases and deposit the change into a savings or investment account. For example, when you purchase your morning coffee for $2.23, the app rounds that up to $3 and deposits the $0.77 into a savings or investment account.
While it may not seem like much, you’d be surprised at how quickly it can add up. If you’re interested, you can see how NerdWallet rates the top apps in this article.
As you can see, with the right down payment saving technique, saving that 5% down isn’t such a daunting task. If you have any questions about down payments or qualifying for a mortgage, please don’t hesitate to call us at 402-991-5153. We know that mortgage questions don’t always arise during business hours, which is why we’re available on nights and weekends as well.