You have you eye on your dream home, but there’s something big standing in your way: the down payment. If you don’t have enough money saved now, how can you accumulate it? Here are a few ideas that may help:

 

 

Base your down payment on the neighborhood you’d like to live in, size of home you want and its average sales price. A local real estate agent should be able to help.

 

A typical down payment is 20% of the purchase price, but there are other options. For example, an FHA loan requires just a 3.5% down payment—but you’ll have to pay private mortgage insurance, which can cost from 0.3% to 1.5% of your loan amount each year.

 

Create a plan to accumulate the cash.

Based on your home’s purchase price, calculate how much you’ll need for a down payment. Then divide your answer by the number of years you plan to save. This will give you the annual amount to save. Then divide that annual amount by 12 and plug it into your monthly budget. Now you have a solid plan to achieve your down payment.

 

For instance, let’s say you want to buy a $200,000 home and plan to put 20% down, or $40,000. If you want to buy in four years, that means saving $10,000 a year. Divide $10,000 by 12 and you’ll need to save just over $830 a month to make your goal.

 

 

Not sure how to find enough extra money each month for a down payment? Consider any or all of these proven approaches:

 

·  Downsize where you live now. Think about moving in with family or to a less expensive apartment than you have now. For example, moving from a two-bedroom to a one-bedroom apartment could lower your rent by as much as 25% to 30%, according to some experts. If you don’t want to move and have a spare room, you could take in a renter for extra income.

 

·  Cut your car expenses. If you’re a couple and have two cars (and two car payments), could you get by with just one? If you have only one car already, would you save money if you drove a less expensive one? Could you carpool or take the bus instead of driving yourself?

 

·  Find an extra source of income. It might be a hobby, freelance work related to your current employment or a second job entirely. The key is to be creative: is there a way you can turn extra time into a second paycheck?

 

·  Don’t buy what you don’t need. Take a hard look at all things you spend money on every month. Do you really need them all? Or put another way, which is more important: a few extra nights out or the new home you’ve always wanted?

 

It’s not about taking all the fun out of life. It’s about setting priorities, with the big picture in mind. If you’re spending thousands of dollars a year on lunches, dinners and lattes, could you put some of those dollars to better use in a savings account dedicated to buying your new home? Take a hard look at your lifestyle, find where money seems to easily slip through your fingers, and figure out a way to maintain a tighter hold on that cash.