How to Save Enough Money for a Down Payment in One Year or Less - Quicken Loans Zing Blog

What’s the most difficult part of buying a home, especially for first timers? Buyers who’ve been through the process will often point to the challenge of saving for a down payment.

This isn’t surprising. Say you find a home for $200,000. A down payment of 10% is $20,000, which is a lot of money to save. Even if your lender asks for just 5%, you’re still on the hook for the not-insignificant sum of $10,000.

Fortunately, saving for this chunk of change, though an intimidating process, is not impossible. There are ways to save enough money for a down payment in just a year.

Here are some strategies that can help you quickly gather those funds. Just be warned ­– they all involve more than a little pain and sacrifice.

Cut Unnecessary Spending

Sheldon Brown, a mortgage broker with Toronto’s Mortgage Architects, said that he understands what a challenge it can be to save money for a down payment. Unfortunately, he said, there is no secret to saving that money quickly.

The best way to do so? Put a limit on your personal spending.

“I would say that what has worked best for my clients was to start by examining their discretionary income and adjusting spending and saving behaviors,” Brown said.

Again, that sounds obvious. But it’s difficult to save the thousands of dollars you’ll need if you’re constantly spending on movies, dining out and traveling. When saving for a down payment, it’s time to cut down on other spending, even if that is a bit painful.

It’s time to remember that your new goal is to have that home, and saving for a down payment needs to take precedence over trying that new Italian restaurant.

Find Additional Work

Nicole Divito, author of the CheapWineandCoffee.com blog, suggests another painful tip – work more.

Saving for a down payment quickly might require you to ditch your current job and find one with a higher salary. It might also require that you take on a side job in addition to your full-time one.

If this sounds like the recipe for a tough, boring year, it might be. But again, if your goal is to get into a house in a year, these might be sacrifices that you need to make.

“Even if you love your job, if your plan is to buy a good home in a good neighborhood with good schools, you can’t afford to live paycheck to paycheck,” Divito said. “I loved my first job out of college, but I wasn’t making any money and I couldn’t save. Looking back, I’m glad I left and even wish I had done it sooner.”

Divito said that if you can find a job that offers bonuses, take it.

“Nothing helps you save faster than a big chunk of change once a year,” Divito said.

Downsize Your Living 

Here’s a bit more pain; If you really want to save quickly for a down payment, you might consider moving back in with your parents, if they’ll have you.

That sounds unpleasant, but Phil Risher, author of the YoungAdultSurvivalGuide.com blog, said that this strategy worked for him when he needed to save a big chunk of money. Risher moved into his parents’ basement when he made a commitment to paying off his debt and saving enough money to buy his own home.

“If you can take advantage of a temporary low living-expense opportunity, I would highly recommend it,” Risher said.

Of course, a living arrangement that saves you money doesn’t have to mean living with your parents. Maybe you live now in a costly apartment. It might make financial sense to move to a lower-cost one when you’re saving for your down payment, even if you have to move to a less-desirable neighborhood.

Just think of how much help those dollars that you aren’t spending on rent can be in your efforts to build that down payment fund.

Take Advantage of the On-Demand Economy

Taking a side job is one way to earn extra income. Participating in the online on-demand economy (requests for service through apps or websites) is another, and it might offer more flexibility.

Maybe you can drive a car for Uber or Lyft or rent out a room through Airbnb to earn some extra cash that you can then deposit into your down payment savings fund.

“It’s a perfect way to bolt on extra income in addition to your full-time job, as most on-demand platforms allow their suppliers to participate in a flexible fashion,” said Bryan Clayton, chief executive officer of Nashville-based GreenPal, an on-demand company that provides lawn-care services to clients.

Clayton said that he has seen firsthand how vendors on his system go from zero dollars in savings to more than $20,000 by working part-time with his on-demand company.

“I have even heard stories of suppliers buying their first home after finding success on our platform,” Clayton added.

Live on One Salary

Do you and your partner each work? Then Divito says it might be time to start living on just one of your salaries. You can then save the other salary in an account set aside specifically for your down payment funds, she said.

Of course, this only works if you can actually afford to live on that one salary, which can be challenging in bigger, more expensive cities.

Have you saved enough for a down payment? Are you working toward saving for that goal? What are some things you’re doing today to make homeownership a reality tomorrow? Let us know in the comments below!

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This Post Has 2 Comments

  1. Quicken Loans is the biggest UPSET I have ever experienced. They say it is fast and easy but believe me……it was horrible!!!! My mother passed away and my family needed money for the funeral and plots. Saw the commercial and thought from what they were saying it would be in 30 days or less. From there I asked them while we were dealing with my mom…..please don’t call until we get through the funeral, and burial. We told them what time and day it was and they called all thru the service.They called every day at least 10 times a day. They would say you need to complete this now it is utmost important!!! If this isn’t completed we cannot process loan. ………to make a Long story short. They have a third party contact that will dissolve any hopes of getting your loan. I had to do a voice conference call with them and my current mortgage company. They asked questions on how the payments have been ( for the past 10 years) and have there been any over 30 days late. They said no……they asked have any been on 30 days late. They said no….. They then asked for the date when the mortgage was paid in December and they said on December 31th. But the payment was due on the first?? They said yes….. I then butted in and said she said there wasn’t any payments over 30 days late! Their 3rd party asked again and said I’m asking the questions if the payment was due on the first wouldn’t that make it 30 days late? Then the lady from my mortgage company said again there are no payments over 30 days late. Their 3rd party outsourced company still reported it over 30 days late and they required more paperwork we were ready to close the loan and would have a extended it a couple of more weeks to get proof we weren’t late. Even though we had good credit and great income. And have lived In our home for 20years with No late payments. We finally had enough so we cancelled the loan. So they got my $400 good faith ( which they are Not) and I hope you all DO NOT USE QUICKIN LOANS!!!!!!!!!!

    1. Hi Harry:

      I’m sorry to hear about your mother. I’m also very sorry for your experience with us. I’m going to pass this along to our client relations team so we can look into it and see what happened. Look for an email.

      Thanks,
      Kevin Graham

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