It can be difficult to save enough money for a down payment on a home. Many lenders expect borrowers to pay 10 to 20 percent of the price in cash. A Federal Housing Administration mortgage only requires a 3.5 percent down payment, but this is still a significant amount of money. These tips can help you save enough cash to qualify for a mortgage:
- Establish a separate savings account for this purpose. It’s too easy to spend the money if you keep it in your checking account.
- Cancel unnecessary services, such as cable TV and satellite radio. Deposit the subscription fees in your savings account every month.
- If you qualify, apply for a low-income discount from the phone company. This will reduce your monthly telephone bill by at least $10.
- Stop buying restaurant meals, liquor, cigarettes or other expensive items. Every week, save the cash you normally spend on them.
- Write to major companies that manufacture grocery items. They will send you coupons for free or discounted products.
- Give up paper towels, plates and cups. Rather than purchase something else, keep the money and put it in your bank account.
- Look for movies and music CDs at a public library instead of buying them. You may also find very inexpensive CDs at dollar stores.
- Contact your health insurance company to determine if you can avoid co-payments by switching to a different local doctor.
- Look for a reward checking account that provides a small rebate on each debit card purchase and doesn’t charge a monthly fee.
- Use certificates of deposit to earn more interest on your money. Many savings accounts currently pay less than 0.2 percent interest.
When combined, these tips may help you save hundreds of dollars every month. Keep in mind that a large down payment will reduce the amount of interest you have to pay and eliminate the need for private mortgage insurance. It may also give you the ability to select a relatively short loan term, such as 15 or 20 years.