Saving for a down payment — a savings goal likely in the tens of thousands of dollars — may feel out of reach. Whether you’re just starting to save or are looking for tips to get the last chunk pulled together, it might be time to get creative with your savings strategies.
1. Take advantage of automation.
Automating your weekly, biweekly or monthly savings is a critical strategy to pursuing your goals. By putting your savings contributions on autopilot, whether through a direct deposit or using a tool like recurring transfers to your Ally Bank Savings Account, you can ensure consistent growth to your down payment fund without having to think about it.
Automating your weekly, biweekly or monthly savings is a critical strategy for reaching your goals.
2. Find areas to freeze spending.
When saving for a house, your budget might need a little adjusting. Review your current expenses and find areas to lower or pause your spending. That could mean eating in or packing a lunch more, not buying new clothes for a few months or cutting back on subscription services. Remember, this doesn’t need to be a permanent change, just a temporary sacrifice in exchange for your future home sweet home.
Tip: Focus on eliminating high-interest debt, so you have more to save. Or consider refinancing debt (credit cards, student loans, etc.) to receive lower interest rates and free up cash from your monthly expenses, which you can then direct toward your down payment savings.
3. Seek a raise.
One of the best ways to increase your savings is by boosting your cash flow. If the timing is appropriate and you feel confident in your performance on the job, consider asking your employer about opportunities for advancement or negotiating a raise. Then, if you receive a salary boost, direct your new income straight to savings — you won’t even miss it!
If a raise doesn't work out, but you still want to increase your income, consider browsing job postings at other companies to potentially earn more in another role at a new employer.
4. Get a side hustle.
Same idea, different strategy. Think about a side job to earn extra income, whether it’s in the gig economy (rideshare driving, grocery delivery, dog walking, etc.), a small business (like selling crafts on Etsy) or an online service (like tutoring or transcribing). You might even think about working part-time in retail or a restaurant.
5. Use a CD ladder.
When you save, you want to make every dollar count. CD (Certificate of Deposit) laddering is a smart way to maximize compound interest for your deposits. CDs can help keep you from using your earmarked money for other expenses, and employing a ladder goes a step further by letting you take advantage of long-term CD rates while still giving you periodic access to your money.
6. Commit to a savings challenge.
A savings challenge might be exactly the extra push you need to take you to your goal. You can find a number of options, such as a 52-week savings challenge or a no-buy challenge that can push you to find extra cash to put toward your down payment.
7. Use windfall money.
Tax returns, holiday bonuses, a check from your parents: Send the extra cash straight to savings. If you're lucky enough to receive windfall money, it's a great way to boost your down payment fund without having to tap into your regular budget.
8. Sell items you don’t use.
Whether you have kitchen gadgets, furniture, toys, clothes, etc., it’s easy to sell items in good condition to make extra cash. Declutter your home, then head to a thrift shop, host a garage sale or post your stuff on sites like eBay, Poshmark or Facebook Marketplace.
9. Explore special programs for homebuyers.
Many local and national programs exist to provide qualified first-time homebuyers with down payment assistance or affordable rates. For example, Fannie Mae’s HomeReady® Mortgage program allows buyers to make down payments as low as 3%, and the Federal Housing Association (FHA) offers loans that require only 3.5% down.
Read more: 6 homebuyer programs (plus a state-by-state guide)
10. Reduce or tap into retirement savings.
If you’re contributing a significant portion of your income to retirement savings, you might temporarily (keyword: temporarily) reduce that amount and redirect it to home savings for a few months. First-time homebuyers can also tap into an Individual Retirement Account without penalty up to $10,000 for a down payment if you close within 120 days. However, you should consult a tax professional before withdrawing retirement funds and consider whether you will be able to meet your retirement goals if you withdraw from your nest egg.
Saving for a down payment is no small feat, but if home ownership is your goal, it may be worth a little extra creativity and a combination of savings strategies to get there.
