1. Create a Budget
The first step is to determine how much you need to save and take stock of your income and expenses to determine how quickly you can get there. Most lenders like to see you put down at least 20%, but some will go as low as 5% if you meet specific qualifications. It's best to aim for 20%, and if you don't need the total amount, you can apply faster or use the extra money to cover the first few payments. Also, make sure to budget for closing costs, which are usually between 3-6% of the sale price.
2. Find Ways to Bring in More Income
You may also want to brainstorm new ways to generate income to reach your goals faster. You could do this by asking for a raise at work, picking up a side hustle, or starting an online business. If you're finding it hard to save because you have too many essential expenses, the only way to expedite the process is to bring in more income. If you mention to a manager that you're thinking of buying a house, you may be able to negotiate a raise if you've proven to be a valuable employee. Or, if a raise isn't an option, maybe you can freelance in your free time or drive for Uber. You may have to get creative, but the more income you can generate, the easier it will be to save.
3. Work on Your Credit
Working on your credit can help you reduce your expenses, and it can also help you get approved for a loan with more favorable terms - including a lower downpayment. Try to pay off as much debt as possible to help your debt to income ratio and reduce any monthly interest payments you owe. Also, pay your bills on time and make intelligent financial decisions. Working on your credit score can also help you get a lower rate on financing a car or taking out other loans, which can help you reduce your average expenses and put more toward savings.
4. Eliminate Luxury Purchase
Another way to achieve your goal faster is to reduce luxury expenses. If you like to shop for expensive shoes and clothing, you may need to stick with your existing wardrobe and put that money toward buying a home. Or, if you often get takeout for lunch, you may decide to start packing a bag lunch instead. If you can manage to brew your own coffee instead of making a daily trip to Starbucks, you'd be surprised at how much you may be able to save to put toward buying a home.
5. Sell Unused Belongings
Maybe it's time to go through your apartment and decide what you no longer use. Suppose you have old clothes, electronics, collectibles, vinyl records, or other items you're no longer using. In that case, you may be able to sell them on the internet and put your money toward buying a new home. Old computers, cell phones, and gaming consoles can fetch a high premium on eBay and Facebook Marketplace. You can also sell your old clothing to a local thrift store or on sights like Poshmark and Depop. If you have any rare collectibles like action figures, comic books, records, beanie babies, sports trading cards, etc., you may consider selling them to a collector to add more to your savings.
6. Automate Your Savings
A trick that can help you stick to your financial goals is to automate your savings. That means setting up your bank account to make automatic deposits from your checking to your savings account after you get paid. You can use your budget to decide how much you can realistically save each month. But if you set it up to automatically deposit the funds into a separate account, it will make it easier to stick to your game plan. The money will still be accessible if you need it for emergencies, but it will help you stay disciplined and avoid the temptation of using that money on frivolous purchases.
7. Research Mortgage Loans
It's also essential to research the different mortgages available to determine which loan product you're likely to use. Every loan has different requirements, especially concerning the down payment. For instance, you can be approved with a down payment as low as 3.5% with an FHA loan. For VA and USDA loans, it's possible to be approved for a loan with no money down. But you must fulfill specific minimum requirements. So, it's crucial to research loans and find out what you may qualify for so you know how much to save.
8. Seek Assistance
There's no shame in asking for help if you need it. Many people turn to friends and family to help them afford the down payment on a home. Even if you don't want to ask them directly, if you have a birthday or wedding coming up, you may decide to ask for cash to put toward your new home instead of gifts. There are also crowdsourcing websites and apps you can use to fund the purchase that have helped many homeowners contribute toward their savings.
9. Use Retirement Savings
If you are determined to buy a home as quickly as possible, you may decide to pause your retirement savings temporarily. While you should always plan for the future, you may expedite the savings process if you stop contributing to your 401K and put that money toward saving for a home. This should only be a temporary tactic, and you should have a plan regarding when you will stop and resume savings again. But this can help free up some monthly cash flow that you can put toward your savings.
10. Set Up a High Yield Savings Account
Another pro-tip is to keep the money in a high yield savings account to earn more interest. Most typical savings accounts make between 0-0.05% interest. High yield savings accounts can offer you up to 0.9% APY. Although it won't double your money, a high yield savings account will help your money grow faster to counteract the effects of inflation. You may also consider investing some money in a low-risk index fund or another stable investment vehicle to get an even higher return. But there is always the risk that the market could turn, prolonging your home buying journey. So be cautious, or you could lose it all.