It is not an unreachable goal to save money for a down payment for a house in one year. Buying a house can be attainable with a little planning and saving. Coming up with money for a downpayment can depend on many things such as income, debt, and responsibilities. Here are seven tips experts suggests when it comes to saving money for a downpayment in one year.
Figure out how much you need to save for a house.
Have a target in mind and map out a plan. Rule of thumb, a down payment on a house is usually 20% of the total cost of the home. For example, if you are looking at a home that cost $250,000 you would need a down payment of $50,000. Twenty percent is usually the goal but you can put down more or less than 20%. Putting down less means you will also have to pay private mortgage insurance.
Know your specific figure—and track it.
Figure out how much you are going to spend on a home and that will determine how much you need to save for a down payment. If you are unsure, check out an online mortgage calclator tool to estimate monthly mortgage payments you can afford.
“From there you can identify an appropriate price range for your house hunt, and you can calculate how much you’d need to save for a down payment,” personal finance author Stefanie O’Connell Rodriguez says.
Create an auto-deduction into an account separate from your savings.
If the money comes out at the beginning then you won’t be able to spend it. Using an auto-deduction from your bank account is a great way to avoid frivolous spending.
“The best part about doing this is that you won’t even see the money in your account if it’s taken out the same day you get paid, so you won’t miss it,” Katherine Perry, CFP, a financial consultant at Fort Pitt Capital Group says.
Consider a money market account.
You do not want to depend on a risky investments in order to obtain down payment savings. You need access to the cash so you will want to choose a short-term account that will yield the most benefit. Examples of these accounts include an online market account or a short-term CD. These two types of accounts allow you to withdrawl within three to six months.
“These same vehicles also often have ‘new money’ promotional rates associated with them that allow you to earn even more than they generally would be offering as an incentive to save your money with that particular institution,” says Jordan Sowhangar, a certified financial planner and wealth advisor at Girard.
Capitalize on windfalls.
Windfalls, coined by the financial industry, **** are the extras that are given or earned that aren’t part of our monthly income. These include a holiday bonus at work, a large birthday check from grandparents, a larger-than-expected income tax refund check, and other instances in which you receive extra money.****
This unexpected money is easier to put away and can help you keep the goal of a downpayment in sight.
Temporarily reduce retirement savings.
This can be a good alternative for a short term not a long term. For just a short period of time, hold off on retirement savings to collect a down payment.
“If you’ve been maxing out your retirement plan contributions to an IRA or 401(k) plan, you may be able to build a down payment within a year by simply allocating all or most of that cash flow to your short-term home purchase goal,” Jim Brown, a financial expert and founder of Your Best Mindset says.
Share your goals with others.
By sharing your goals other can help hold you accountable. Having a supportive network will help you with success. Also friends and family can help out by giving you cash for birthdays or any celebration that can help achieve your goal.
