My husband and I saved $55,000 for our down payment in less than 5 years!
Here is how we did it.
At the start of our marriage, we made finances a priority. We created a budget and worked at it constantly. The last thing I wanted was for money to be a breaking factor in our marriage like it is for so many others. Thankfully, with our hard work from the very beginning, I can confidently say that we have never fought about money.
We used a cool little budgeting app called EveryDollar. I will cover that in detail later.
We learned to settle for less than fantastic because we had our eyes set on a specific goal: to buy a home! Sure, it would have been nice to have shiny new shoes or a fashionable leather hand bag, but I knew that would only add friction to our pursuit. So, I decided to wait.
During these 5 years, we had two kids and I left my job as an Elementary Music Teacher to be a stay at home Mommy/Real Estate Agent. Kids are expensive.. let me tell you. That added a whole lot of friction to our savings, but it is so worth it. Our boys are the most amazing little blessings we could have ever dreamed of.
I was extremely grateful for the opportunity to work from home and stay with my boys 24/7. We saved a lot in daycare costs and I gained an amazing amount of sweet memories that will continue to make me smile for the rest of my life.
Now that you know a little bit about us, here are 5 Simple Tips to Save for Your Down Payment!
1. Set a Clear and Realistic Goal.
How much home can you afford?
A good rule of thumb is that your monthly mortgage payment should not be more than 28% of your pre-tax monthly income.
To determine this, multiply your monthly income by 28 and then divide that amount by 100. This will give you your maximum mortgage payment.
Look at the market right now. What does your dream ideal home cost in today’s market?
Now remember, this will change… When my husband and I first started saving, it was 2019 and our ideal home cost $180,000.
Well… 2022 came and showed our cute little down payment who was boss! The market exploded and our ideal home went from $180,000 to $250,000. This increased our down payment goal by $14,000.
Hopefully the market will not jump that quickly again any time soon. Just remember to account for a steady market increase when you set your ideal home price.
How much would you like to save?
We chose to save 20%. We did this because we wanted to get into a conventional loan and avoid PMI (Private Mortgage Insurance).
If you can’t quite make that 20% goal, you can get a conventional loan with less. You will pay PMI, but the PMI will go away after you reach 20%.
Talk with a lender about what plan is right for you — Conventional, FHA, VA, Down Payment Assistance Grants.. I will cover those in detail in a later post.
Where should you keep the money while you are saving for your down payment?
It is best to keep the money separate from your checking account. You want it to be accessible, but not too accessible. Ask your bank about a high yield savings account or money market account.
We chose to put our funds into a CD (Certificate of Deposit). A CD offers pretty good interest rates, but there’s a catch. You cannot access the money if you were to need it without being penalized. We were only able to do this because we put our money in early enough AND we had a very comfortable emergency fund.
2. Reduce Debt.
We actually chose to do this step before starting our savings.
Luckily, we did not have a lot of debt. Just a brand new car note. (Please don’t buy a car brand new if you are a beginner adult.. A used car will do and it will save you so much money).
Eliminating our debt before we began our savings journey allowed us to put a larger amount towards our goal each month.
This was great for two reasons:
We felt free! We had a 3 year old car that was PAID OFF! This excited us and fueled our motivation to get to our next goal: a 20% down payment!!
The mental boost that we got allowed us to save a lot more than we would have if we still had that car note distracting us.
Reducing your debt will make you a more attractive candidate for a loan.
Lenders will look at your debt-to-income ratio to determine your ability to make your monthly payments.
Get excited about taking control of your finances!!
3. Reduce Spending.
Create a NEEDS and WANTS list.
If there is something that your household needs like, toilet paper, then by all means.. buy the toilet paper! However, if there is something that you want like, that cute leather hand bag.. opt to put that purchase onto a wish list instead.
Here are a few examples of areas where you can tighten your belt and reduce your expenses:
Clothing
Restaurants
Subscriptions
Vacations
Amazon (yes, I said it)
Most people are so eager to go from brand new to fantastic!
It is good to stop and smell the roses when you are in the “just okay” part of your life. After all, if you skip over mediocre and okay, you might spend your whole life with fantastic as your standard. That does not leave you with a whole lot of room for upward growth.
Let me be clear.. I am referring to the material things that you surround yourself with. You can totally be fantastic, but your clothes are “just okay” or your car is “mediocre.” You can drive that fantastic car that matches your fantastic personality later. After you’ve accomplished your goals.
Find ways to save on your NEEDS
We started buying all of our groceries at ALDI. I LOVE shopping at ALDI. The prices cannot be beat. Just be sure to shop for the ALDI specific brands. The name brand products will still cost the same amount that they do at HEB and Kroger.
If you don’t live close to an ALDI, just try to buy store brand when you can and shop at the Dollar Store for select items.
4. Create a Budget.
Track every expense on a budgeting app. We use an app called EveryDollar. Click here to Download on Google Play. And here for the Apple Store.
You have to pay a yearly subscription to use the app, but we easily make that money back in just a few months by not having to spend HOURS plugging in expenses and balancing a spreadsheet.
Sit down with your partner to create your monthly budget. The goal is to give every dollar a job.. get it? EveryDollar.. ha ha.
Start with your consistent monthly expenses like rent, tithing, phone bill, subscriptions, utilities, retirement, etc.
Set a goal for variable expenses like groceries, gas, gifts, restaurants, clothing. Check back often to see how you are doing and adjust your spending or your budget accordingly.
My husband and I also have pocket money funds worked into our budget. This allows us to have a little wiggle room with purchases for ourselves that were not part of the budget plan. My hubby uses his pocket money almost exclusively for disc golf. Whereas I will likely spend mine on something crafty.
5. Boost Your Income.
Do you have any special skill sets that you could profit off of?
Maybe you like to take pictures – offer amateur photography sessions over the holidays!
Maybe you like to meet new people – become an Uber driver!
Find something that sparks your interest and evaluate if you could make it into a side hustle.
Maybe you have some extra time in your schedule?
I have a friend who is a Band Director, but over the summer he took a job at a jewelry store so that he could help his family meet their financial goals.
This is the only tip that we did not use while we were saving. We used our weekends and summers for family, camping, and disc golf. And that totally worked for us!
Final thoughts.
Saving for your first home down payment can be daunting. It can feel like you are treading water. I can’t begin to tell you how many times I looked at the numbers month to month and felt completely defeated.
This was not helped by the amount of my friends sharing BEAUTIFUL pictures of their homes on social media. I couldn’t help but feel inadequate.
Remember, you don’t have the whole story. They probably make twice my salary and maybe they didn’t commit to 20% down. Either way, that is their beautiful story, and this is mine. Own it. Love it. Work at it.
If you made it through this post, good for you! I would love to connect with you. Click here to send me a direct email with any questions or comments.
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