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Saving and budgeting

Why it’s never too early to start saving for a down payment

By Liz Keuler

August 2018
The best advice my mom ever gave me was, “Pay yourself first.”

Pay yourself first

What does that mean? Every payday, put some funds straight into savings – before you throw that cash at other expenses or purchases. 

Now, it doesn’t mean you should ignore your bills. Obviously, you need to pay your rent and make your car payment and all the rest. But if you set yourself an aggressive monthly saving goal, paying yourself first can help you avoid wasting money on little things and reach your overall saving goals sooner – even if you aren’t really sure what you’re actually saving for yet.


Do you eventually want to own a home?

Most people will answer “yes” to that question: According to the National Association of Realtors’ 2018 Aspiring Home Buyers Profile, 80% of non-owners say they aspire to homeownership. 
 
For my husband and I, the idea of buying a house was crazy, until all of a sudden, it wasn’t. Sure, we always assumed we’d buy a house someday, but the due date was “when we feel ready.” One minute we weren’t ready, and the next we were moving in. Because we’d been paying ourselves first for years, we had enough for a 10% down payment while leaving a financial cushion in our savings.
 

It’s never too early to start saving for a down payment

If you think you might ever want to own a home, it’s never too early to start thinking about that down payment. 
 
RENTcafe recently reported that Millennials spend $93,000 on rent by the time they hit 30. Sounds about right – before we bought our house (we were both 28), we spent about $75,000 on rent. Yikes!
 
I don’t regret spending $75,000 on rent. Renting is great! It gives you flexibility when you need it. But while you’re paying rent, make sure you’re paying yourself. Because if and when you decide owning a home is right for you, you’ll need more than the ability to pay a mortgage on time each month – you’ll need to make an investment up front via a down payment. Plug some numbers into a down payment calculator to get a sense of how much you might need.
 
That investment could be as little as 3-5% if you get an FHA loan or finance conventionally with private mortgage insurance, so you might be able to buy a home sooner than you think. But the more you save, the more options you’ll have in terms of the houses and neighborhoods you can afford. So start paying yourself first. You never know when “someday” will become “right now.” 
 

Related to This

Brian Kinniry •

There are down payment assistance programs that can provide a 3.5% down payment for the borrower, if they qualify which equates to a "zero down" mortgage.

Liz Keuler - Readynest editor •

Brian, down payment assistance is a great option for many homebuyers! We have some info about DPA here: https://www.readynest.com/getting-ready-to-buy-a-house/down-payment-assistance. A "zero down" mortgage could be an option for some, but not all borrowers will have access to or qualify for that kind of DPA. Building up savings means more options for homebuyers, or for anyone who might have a big purchase in their future!

Shirevell A Williams •

Good

Cyntraila Tanner •

Try to save 1,000 monthly

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Liz

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Liz Keuler is the editor of Readynest. She spent a decade meandering through radio, nonprofits and the corporate world before convincing MGIC to hire her based on her staunch grammatical convictions. She lives in a charming 100-year-old bungalow on Milwaukee’s East Side. Her interests include old Ernst Lubitsch films, new action movies, 60s girl pop, Regency romance novels, word games, sewing and shallots.
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