How to Save for a Downpayment
If you set a New Year’s Resolution to buy a home, you are in good company! But like all resolutions, you’ve probably got some work to do to meet your goal, and for first-time homebuyers, that work usually comes in the form of saving for a down payment.
Home ownership is often viewed as one of the staples of adulthood in the US, but it’s a goal that many Millennials are still striving for. In fact, according to CNBC, only about 38% of those 25-34 are homeowners. For reference, that’s 8-9% lower than in previous generations. With an unprecedented student loan burden and skyrocketing rent prices, saving enough for a down payment has felt like an impossible obstacle for many, Millennial or otherwise.
But buying a home should be viewed as a goal rather than a dream, and goals can be planned for and accomplished! Start with these 5 pro tips to save money for a down payment:
Write the Goal Down. The first step is also the simplest, so don’t skip it! Writing your goals down has a serious psychological benefit - things inked onto paper feel more real, more important, and more achievable, meaning you’re more likely to take action on them.
But don’t just write down the goal. Use the SMART guidelines for goal setting, and write those down, too! SMART guidelines say that goals should be Specific, Measurable, Attainable, Relevant, and Time-bound. So grab a pen and paper, let’s walk through it together!
Specific: I need to save $______.__ by __/__/___ in order to buy a house priced at $______. (We highly recommend you apply for preapproval to figure out what you can qualify for, and what percentage of a downpayment you can expect to pay.)
Measurable: In your specific goal, you set an amount and a date - now divide the amount by the number of months away your goal is. For example, if I want to save $10,000 in a year, I need to save 10,000/12 = $833.33/month.
Attainable: Did you just notice that maybe you can’t save $833 a month? That’s okay! You now know if your goal is attainable or not, which means you can go back and alter your goal. Maybe you’ll shoot for a smaller down payment by looking at a smaller mortgage, or maybe you simply need to extend the amount of time it will take to achieve it.
*Measurable and Attainable are probably the two most crucial parts of a savings goal. If you don’t calculate how to measure your progress by using a weekly or monthly goal, you won’t know if the goal is reachable or not. And nothing feels worse than spending a year saving money just to come up south of short!
If your initial goal isn’t attainable, don’t give up! Figure out where you can change the numbers to make the math work for you. Look at lower mortgage amounts, extend your timeline, and/or research down payment assistance programs. You can do this!
Relevant: Is your goal reasonable, realistic, and beneficial? If you’ve done your work on the previous two parts, your answer here should be a resounding yes!
Time-bound: When do you want to reach your goal? Check in with yourself weekly to make sure you’re on track.
Make Goals Public. Okay, now you know what your goal is and what you need to do to achieve it on your timeline. But does anyone else know? TELL THEM! Publicly sharing your goals has a two-fold benefit. For one, when your friends and family know about your goals, they can get on board and help you succeed! Plus, public accountability comes with a certain fear-of-failure factor - if you miss your goal and everyone knows it, that doesn’t feel great! The fear of public failure is a strong motivator - use it to your advantage.
Get a 3rd Party Accountability. Since you’ve already committed to going public with your savings goal, find a friend, coworker, family member, etc. who is your designated cheerleader and coach. An accountabili-buddy is just that - a buddy who keeps you accountable. A good accountabili-buddy will help you figure out the areas where you can cut back spending in order to save more, and will call you out when your actions are counterproductive to your goals.
Define Accountability and Consequences for Failure. Let’s be honest - it’s hard to stick with a big goal like saving money. You start out super excited, but then things get hard (and probably a little boring too). And a few months in, you start to think oh well, I’ll just give up, it’s easier! And why wouldn’t you?
That’s why you set or define consequences for failure! When you’re saving for a down payment, you’ll probably be defining consequences along the lines of “if I miss my savings goal, I’ll have to sign another lease” or “if I miss my savings goal, I’ll have a higher monthly payment.” When that why bother? feeling strikes, remember the consequences of quitting, and the reward of succeeding (a snazzy new house and a great investment!).
The Real Estate Agent Spokane Team
The Real Estate Agent Spokane Team is dedicated to sharing and promoting everything great about Spokane! We believe that Spokane is the best city in America, and there are so many reasons why. That’s why we dedicate our blog, Facebook, and YouTube channel to highlighting the best that Spokane has to offer. Be sure to follow along with us for more insider updates on events, dining and nightlife, and outdoor activities in Spokane.
Carrie Meyer, leader of the Real Estate Agent Spokane Team, transferred to real estate after a 30+ year career as a paralegal (Certified Legal Assistant). Her combined experience in law and real estate makes her a tour de force in contracts and negotiations.
Wendy Smith, team member, has lived all over the country before finding her forever home in Spokane. Wendy pairs her real estate experience with a background in customer service to provide an exemplary client experience for both buyers and sellers.