UrbanTurf Reader Asks: What Are the Best Methods to Save for a Down Payment?

• June 8, 2011
• 19 Comments

by UrbanTurf Staff

In this installment of UrbanTurf Reader Asks, a reader who is starting to set aside money for a down payment on a home inquires if UrbanTurf readers use specific methods in order to reach their down payment goal.

I have started the process of setting aside money for a down payment on a new home, and am wondering if any readers out there have happened upon a particularly successful method or formula for saving for a down payment. I have taken all the obvious steps of going out to restaurants and bars less, shopping less, and in general cutting back on the fun stuff that I used to do, but the savings is not accumulating as quickly as I hoped. If anyone out there has advice on a specific approach or program that worked well for them, I am all ears.

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This article originally published at https://dc.urbanturf.com/articles/blog/urbanturf_reader_asks_what_are_the_best_methods_to_save_for_a_down_payment/3621

19 Comments

1. lisa g said at 10:01 pm on Friday June 10, 2011:
   What I did was to figure out what my mortgage would be at my real estate price point. In my case, it turned out to be more than $700 over what I was paying in rent. Then I "pretended" to be paying that mortgage for more than 2 years, putting the $700 in a savings account not linked to my checking account (to prevent temptation), until I had a good-size down payment. In the process, I learned a lot about the lifestyle changes that come with purchasing a house. Good luck!

1. Ali said at 8:29 pm on Thursday June 9, 2011:
   Also - another thing that helps: 5. - Max out your 401K - specially if they let you take a loan for your first primary residence - as most 401K plans do. This money will be pre-tax, so you will not see as much impact. Also - the payback/interest on this loan will go back to your own account - so theoretically you are not paying anyone else the 4.25% interest - but yourself.

1. Jo said at 7:41 pm on Friday June 10, 2011:
   Not sure if this is a feasible option for you but the best way to save for a down payment is to live at home with your folks. My parents were kind enough to let me live at home and when the time came to buy a house, I had a solid down payment. Yes, it may seem a little juvenille living with your parents as an adult but the pay off is way worth it when you look at the bigger picture.

1. Ali said at 8:27 pm on Thursday June 9, 2011:
   1. Pay off all your debt/loans/car notes etc. 2. Curb extraneous expenses - but divulge once in a while otherwise you will go insane. 3. Increase income. 4. See savings rise exponentially. All others (like Mint) are tools to help you with #2 - but you HAVE to do #1 to see savings rise exponentially.

1. EYA Homes said at 7:08 pm on Thursday June 9, 2011:
   Great responses! One additional thought is to buy new construction that has a later delivery date. EYA is often able to work with homebuyers on a longer-term down payment plan in which you make payments monthly toward the home. If the settlement is 12-15 months out, that's usually enough time to have the cash together by the time you go to settlement. It's known as "promissory note" or "p-note". One additional nice perk about using this down payment method: you buy at today's low prices. If you're interested, our onsite sales managers can give you more details. Best of luck!

1. Jason McCain said at 1:50 am on Thursday June 9, 2011:
   Time for a second job!

1. JT said at 4:15 am on Thursday June 9, 2011:
   Depending on your price point, save enough to cover your closing costs and then get a 100% loan. Inconceivable you say? BB&T has a 100% financing program up to $417,000 with no mortgage insurance. It is a 30 year fixed amortized loan so you are paying it off every month. If I was buying today and didn't have a substantial down payment I would be all over it - phenomenal deal that may not last forever. UrbanTurf had a post about it a while back...

1. First Time Home Buyer said at 12:58 pm on Thursday June 9, 2011:
   Penny pinching will save you money but it isn't going to get you a down payment. You will make some progress if you're looking to save over time. But if you're looking to buy soon you need to make major changes. Get a roommate, get rid of your car if you have a high car note - that will knock out the car insurance as well. You don't have to live a life of deprivation but you shouldn't hop on any flights over 4th of July weekend or any other upcoming holiday. These are ways to save big bucks fast! I know because I did it over the past 6 months and just put an offer on a home yesterday 😃

1. EG said at 11:38 pm on Wednesday June 8, 2011:
   Janson, All Your Worth is an AMAZING book! Totally agree with you. As for the savings question, I can't say anything that hasn't been said in the comments already. Just start sacrificing.

1. Mary said at 11:43 pm on Wednesday June 8, 2011:
   Agree on mint... and the putting a chunk of money away right off the paycheck... also what worked for me to 'reel in' the spending was setting up a savings account tied to my checking. the king where if needed i could transfer funds from it into my checking right away.. Then i set up an auto transfer from my checking account on the two days when I got paid.. i started out with a random amount $25 per pay check... and kept it like that for a couple months... i find that you tend to adjust when it's only $50 less a month.. then over time you can up the amount.. it's sort of tricking yourself into saving.. if i reach the end of the month and need some money i dip into the savings guilt free since it's sort of bonus money... this was a great way for me to figure out how much money i really need on a monthly basis to live comfortably..

1. Campy said at 9:01 pm on Wednesday June 8, 2011:
   ...and by seconding mint, I really meant 4th or 5th (that's what happens when you start replying to something in the middle of doing 3 other things)

1. Janson said at 9:10 pm on Wednesday June 8, 2011:
   While I love Mint, it doesn't tell you what your goals should be. For that, I really liked the book, All Your Worth by Elizabeth Warren, the lightning rod leading the setting up of the Consumer Financial Protection Bureau and the occasional awesome guest on the Daily Show. All Your Worth has a great idea based on behavioral economics on getting you to have the right mix of spending on needs, wants and savings. Can't recommend it highly enough. And while it is a simple book, the economics behind are sophisticated, which is a nice trick. I'd also suggest you skip saving for downpayment and just go work with NACA. No down payments and no mortgage insurance (but still a lot of reasonable financial qualifying).

1. Cuse said at 8:26 pm on Wednesday June 8, 2011:
   I third the Mint.com idea and second Dana's! When my husband and I were saving, we set up a profile on Mint, which helped give a good breakdown of where we were spending our money and we set up an account just for down payment $$. And we stopped going out to eat :(

1. Mike said at 8:28 pm on Wednesday June 8, 2011:
   I did the same...I diverted $500 per paycheck off the top each time into another account where it wasn't touched. It takes a long time. But not having to pay $450 PMI a month can be a nice incentive. I like the idea of the change jar. I do that for christmas presents. At the end of the year there is $400 or so in change.

1. Nikki Smith said at 8:42 pm on Wednesday June 8, 2011:
   Open a high interest savings account, and set up an automatic savings plan. Stop going out for lunch at work. Stop drinking so much at the bar. Consider picking up part-time or freelance work.

1. Campy said at 8:59 pm on Wednesday June 8, 2011:
   I second the mint.com recommendation. It is tremendously helpful to visual your finances all in one place. Setting a budget for individual spending categories is super easy and you can even get alerts for when you're approaching your monthly limit (restaurants and alcohol sneak up on ya!) There are many alternatives to mint.com out there though most of them use the same technology in the background (yodlee). I've found Mint to be the easiest to use.

1. Ben said at 7:59 pm on Wednesday June 8, 2011:
   I had the same question and someone recommended Mint.com, a financial organizer that helps you figure out where you are spending your $$$. It helped and I recommend it. Good luck. This is an expensive city.

1. La said at 8:07 pm on Wednesday June 8, 2011:
   I second the Mint.com suggestion. They have a section called "Goals" that calculates how much you must save each month to reach your goal in a certain period of time. Then, you can tie a savings account to that particular goal, and Mint lets you know if you are ahead, on track, or behind on reaching the goal. It's pretty cool, and it will help you realize how much you are spending on non-essential stuff.

1. Dana Hollish Hill said at 8:14 pm on Wednesday June 8, 2011:
   I heard two great tips when I was first saving for a down payment. The first was to get a big jar and label it "down payment." Each day we would collect our pocket change and watch it fill up. Seeing it grow was encouraging. We also started a bank account called Down Payment. We set up direct deposit so a certain amount of my husband's paycheck would go automatically to that bank account. When we filled up the down payment jar, we would deposit the money in that account.