If your heart is set on buying your first home, you’ll need to set your mind on saving for a deposit first, unless you can qualify for the No Money down USDA or VA Loan.
If you don't qualify for either of the No Money Down loans, you will need at least a three and one half to five per cent deposit towards your first home.
Also, you may be required to show evidence of a good financial history, with ‘genuine savings’ often part of the lending criteria.
In addition to complying with lenders’ policies, having a good down payment could also save you money in the long run as you’ll be borrowing less and spending less on interest as a result.
But exactly how can you accelerate your first home down payment? Here are some strategies to help you get your first home savings on track.
- Follow your money – Understanding exactly where your money goes is the only way to know where and how you can save more. Try to keep a diary for a month and record all your purchases, from your daily coffee through to major commitments such as rent. Once you identify where you’re spending you’ll be able to make the most effective cut backs.
- Set a budget – Create a budget that factors in all major financial commitments, and then stick to it. Remember to leave a buffer for incidental purchases; if your budget is too restrictive you’ll never stick to it. Keep it achievable.
- Know your destination – Without a savings goal your savings plan is bound be forgotten, or alternatively, you’ll simply give up. Sit down and determine exactly what size down payment you need to save. The best way to do this is after you’ve assessed your borrowing capacity with your Classic Home Loans Originator.
- Make a change – Saving takes determination and it will only work if you’re completely committed to the end goal. Leave any of your bad spending habits behind, especially
credit card debt, and be firm with friends who might try to steer you off course. Keep your new home firmly at the front of your mind.
- Automate – The most effective way to stick to a savings plan is to set up an automatic
savings account. And do your best to never withdraw any of your cash back out!
- Assess – Don’t set up a savings plan only to never actually evaluate how you’re tracking. Make a note in your diary to assess your progress every three months. That way, if you find your savings plan too easy, too hard or too slow, you’ll be able to adjust it accordingly.
Top down payment saving tips
- Rent cheaper – Whether it’s with your parents or friends, look at how you can reduce your rent obligation, normally one of the biggest expenses to slow your deposit down.
- Cancel the credit – Steer clear of credit cards and any other high interest loans. Accumulating debt will only work against your savings efforts.
- Pack your snack – Purchasing food from fast food restaurants and convenience stores is a major expense. Be prepared and pack your food the night before if you’re heading out.
- Stay in – Nights on the town and dining out can really chew into your finances. Try to stick to treating yourself to one night out for dinner as a once a week or once a month treat, for instance.