Ways to save for a down payment on a house
It used to be that you didn't always need a down payment for your house, or you could find lenders who would be willing to finance 95 or 97% of your mortgage.
However, with mortgages more difficult to obtain than ever, in most cases a down payment of 10-20 percent of the cost of the house is ideal. Larger down payments have a number of benefits as well, including lower house payments.
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When you do the math, this adds up to quite a large sum of money. However, saving for a down payment on a house needn't take long and isn't necessarily out of reach. The following are some ways to save for a down payment on a house:
Put money in an interest-bearing CD or savings account
If you plan on saving money, the best way to do so is to put it in an interest bearing CD or savings account. If you're saving for a house, a CD, or certificate of deposit, is the best choice. With a CD, you put a fixed amount of money into the account for a certain amount of time, usually between a few months and a few years. During that period of time, the money accrues interest, usually around 5% or so. This is much more than you would get by putting it in a regular savings or checking account.
Gifts from family or friends
If your family or friends routinely give you cash gifts for holidays or special occasions, such as a college graduation or other milestone, store that money away in a savings account or CD. This can quickly add up, and since the money was a nice bonus anyway, it won't be missed.
Tax returns
Tax returns can be quite sizeable, so make it a point to put the majority of your return towards your savings for a home. By putting it in a CD, you will not have access to it and will be less likely to spend it. A tax return can be a big chunk into your savings for a down payment on a house.
401k
If you have a 401k or retirement plan, you may want to dip into that for a down payment on a house. However, keep in mind that you must pay this back at some point, usually over the next 5 years, with interest. Also, if you lose your job or are laid off, you will need to pay this back typically within 90 days, which can be even more stressful when looking for a new job.
Do a budget
If you want to get into a house and need a down payment to do so, you should set aside a certain amount of money each month to save. You should first do a budget to see how much you can realistically save. Ideally, you should cut out certain things that aren't really necessary, like cable TV or gym memberships, short term so you can save for a down payment. Saving just an extra $200 a month can give you $2400 a year. You can also cut down on monthly grocery bills by using coupons or shopping during sales. This can make a big difference when it comes to saving.
