Saving up to buy a house is no easy feat, but there are steps you can take to reach your goals. Here are some ideas to help you go further faster.
1. Automate It
Saving money can be hard, but automating the process makes it easier. To get started, figure out how much you need to save every month to meet your goal.
Open a separate savings account and set up automatic transfers from your main checking account. You can pick the interval, whether you want to save money weekly or monthly.
You don’t have to think about saving after setting up automatic transfers — your accounts will do it for you. Plus, you’ll get that money out of your checking account before you can spend it.
Before you set this up, though, make sure you can afford it. Overdrawing on your account can lead to overdraft fees, which can set you back as you’re saving for a house.
2. Overhaul Your Budget
It’s hard to save if you don’t know where your money is going each month. Take some time to design a budget to get a bird’s-eye view of your income and expenses.
Take a look at how much you’re making and spending each month. Write down your major expenses categories, like rent and car payments and miscellaneous expenses.
You can do this with a simple spreadsheet or use a handy budget-tracking app to do the heavy lifting.
Once you get a sense of your spending patterns, look for areas where you can cut back. If you get takeout all the time, consider cooking at home to save money.
If you can squeeze extra savings out of your budget, you can throw that cash directly into your home savings account.
3. Consider Downsizing
Despite what some personal finance experts would have you believe, cutting out lattes and avocado toast will only get you so far. You’ll probably see greater savings if you can cut down on your major expense categories like rent and car payments.
If you’re paying a lot in rent, consider getting a roommate or two. Or, if your car payment is breaking the bank, think about trading in your vehicle for a cheaper model.
While you might have to make some temporary sacrifices, embracing a minimalist lifestyle could help you save for a home faster.
4. Boost Your Income
Budgeting and saving money are only one side of the coin when meeting a savings goal. The other side is increasing your income.
Maybe you can ask for a raise at your current employer. Or, if you’re open to changing jobs, perhaps you can earn a certification that could lead to a position with a higher paycheck. Don’t forget to negotiate salary before accepting an employment offer.
You could also join the gig economy by driving for a ride-sharing service like Uber, shopping for Instacart, or offering services through TaskRabbit. If you have an extra room in your apartment, consider renting it out on Airbnb.
If you have a car, you could even get paid to wrap it in ads and drive around town through a company like Wrapify. You have many avenues to pursue your entrepreneurial side and speed up your home-buying timeline.
5. Pay Down Debt
When you’re saving to buy a home, paying down debt might not be your top priority. But having multiple loans can hurt your chances of getting a mortgage.
Mortgage lenders look at your debt-to-income (DTI) ratio when you apply for a home loan, according to the CFPB. If you owe a lot of debt in proportion to your income, a lender might reject your application for a loan or only lend you a small amount. A high DTI could also mean you don’t get the best interest rates.
You can lower your DTI ratio and become a better candidate for a mortgage by paying off debt now, especially high-interest debt.