October 09, 2018

Ways to Save for a Down Payment

Do you dream of buying your own home, but stop short when faced with getting together the down payment? It's time to shift your mindset: You can do this.

First, it's important to know that 20% down is not required. In fact, the average down payment for first–time homebuyers in 2017 was 5%, and 10% for repeat buyers, according to the National Association of REALTORS®

Second, look to build your nest egg and reach your homebuying goal with these tips.

Explore Programs:

  • Reach out to a housing counselor or  lender to ask them about state and local down payment assistance programs.
  • Visit the U.S. Department of Housing and Urban Development's directory of state, county, local, and municipal programs to find out what kind of help is available in your area.
  • Find out if you may be eligible for down payment assistance programs through the Down Payment Resource® tool

Save in Key Areas:

  • Consider downsizing to a less expensive apartment or renegotiating your current rental lease for a two– to three–year term at a fixed rate so you aren't seeing annual increases while you save. You are an asset to your landlord if you pay your bills on time and maintain the property. It's worth it to him or her to keep you in place.
  •  Pay your loans on time and in full. Zero interest and zero late fees mean more savings for you nest egg. Try to renegotiate any credit card, car loan, school loan balances to a lower interest rates that could help you pay off balances faster. Both will help improve your credit score.
  • Shop around to reduce major monthly expenses. Can you lower your cell phone package? Can you take public transit instead of buying that new car?
  • Identify key areas where you tend to shop big and shop medium instead. This isn't about becoming a monk, it's about controlling spending. Instead of paying for a gym membership, ride your bike, run or swim at the YMCA. Learn to love drip coffee instead of buying espresso.
  • When you receive infusions of money like your tax refund or cash gifts — sock it away in a CD or money market account to earn a bit more. Every little bit helps!

Keep Your Eyes on the Prize:

  • Review all accounts and finances regularly and squirrel away whatever you can to reach your goal. Also, track your savings progress — whether it's a hand–drawn temperature gauge on the refrigerator, or an app on your cell phone.

Learn more about buying a home at My Home by Freddie Mac®.

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