Borrow Carefully

Getting down with your down payment? How to save faster!

Read: 4 minutes

When Jennifer Merritt and her husband married six years ago, they knew their dream of buying a home wouldn't come quickly. Saving for a down payment was a long process, but after their son was born, the couple found that spending more nights at home translated into supercharged savings. Soon, Merritt estimates, they were putting away an extra $800 per month.

No matter how much money you make, saving for a home is probably within reach, particularly if you're considering home mortgage options that allow less than the traditional 20 percent down payment, like FHA mortgages, VA mortgages, or Conventional 97 loans. Here are some strategies to help you on your way:

1. Set some goals

The first step to saving for your down payment is knowing how much money you need. "Get some sort of pre-qualification letter, even if it's an informal conversation with your bank," says Sean Stein Smith, a certified public accountant. Check your credit rating, and talk to a banker about high and average scores when saving for a home.

This preliminary legwork will give you a better idea of how much home you can afford—and how large a down payment you should aim for.

2. Put your bills on a diet

Once you have a goal, start thinking about how to cut your costs. Take a close look at your regular monthly bills and aim to redirect 30-40 percent of the money going out the door into your savings, says Kyle Winkfield, a wealth management expert in the Washington D.C. area. Assess what you're willing to give up or what you can cut back on—like gym memberships you might not be using, or cable channels you rarely watch. Saving $10 here, $50 there adds up, Winkfield says.

"When we can see ourselves in our new house, that vision is so powerful that it can take a person who is lackluster about saving and help them find the discipline."

Kyle Winkfield, Managing Partner of O'Dell, Winkfield, Roseman and Shipp

3. Spend carefully

Once you've gotten your monthly bills under control, take a look at your discretionary spending. "Consumers have a tendency to be wasteful and not know it," says Winkfield. "Keeping track of your spending is very revealing."

Start by focusing on the big three expenses: food, entertainment, and transportation. These can quickly eat away at your paycheck. For example, Winkfield notes, if you're spending $100 a week or more on eating out, that could become an extra $400 a month in savings. Finding free local activities, and carpooling, can also help you save money.

Winkfield recommends finding an app that regularly analyzes your spending and crunches the numbers for you. That data will give you insight into which areas of your budget can be squeezed tighter.

4. Automate

Cutting expenses is only one part of the equation—the other half is putting away the money you've saved. To make sure that she and her husband didn't squander the $800 per month that they cut out of their budget, Merritt set her account on autosave. That way, her bank set aside money from every paycheck, before she even had a chance to see it—or spend it.

"Open a separate account just for your home savings. Then, set a dollar amount or percentage of your paycheck to redirect into that account," says Smith. Whenever you come into windfalls of money from side jobs, bonuses, gifts, or tax returns, add those to the reserve.

5. Keep your eyes on the prize

While you might start your savings with a lot of excitement, it's hard to keep the pace going. To keep herself and her fiance motivated for the two years they spent saving, Taylor Kidd used a thermometer-shaped chart. "Every month, I was so proud to color in the next section and watch us get closer to our goal," she says. "We put it on the fridge and it was a reminder of why we were working so hard to save."

"When we can see ourselves in our new house, that vision is so powerful that it can take a person who is lackluster about saving and help them find the discipline," Winkfield says. Speaking of discipline, saving for your new home is also an opportunity to put yourself to the test—and change your spending habits. "Don't let that new habit of being fiscally in shape and focused go by the wayside once you buy," Winkfield adds. "It's not just about a down payment. Home ownership is an ongoing investment."


Dawn Papandrea is Chase News contributor. Her work has appeared in Family Circle, Parents, Latina, and WomansDay.com, among other outlets.