Buying a home is a huge undertaking, so if you're ready for all that responsibility, there may be just one thing standing in your way: money, or a lack thereof.
Though it's possible to buy a home with a down payment of under 20%, it's good to aim for that 20% target for a number of reasons. First, doing so will help you avoid private mortgage insurance, or PMI, which will only make your ongoing mortgage payments more expensive. Secondly, by putting down 20% of your home's price, you'll have an easier time building equity in that property.
Of course, coming up with a 20% down payment is easier said than done, especially when starter homes today can easily come with a price tag of $150,000 to $250,000 -- or more, depending on where you're shopping. But here are a few things you can do to scrounge up that cash and put yourself one step closer to owning a place of your own.
1. Follow a budget
Many people pay their bills every month without really understanding where their money goes. But if you're willing to set up a budget and then follow it, you'll have an easier time tracking your spending and carving out ways to boost your savings. For example, you might think you only spend $200 a month on restaurants and another $200 on leisure, but what if, upon creating your budget, you realize you typically spend more like $300 on each? That could set off a light bulb in your head to cut back in both categories and bank that savings for your down payment.
If you're intimidated by the notion of creating a budget, you should know that it's actually really easy. Open a spreadsheet, and list your monthly expenses. Then, comb through the past year's bank and credit card statements to see what each bill or spending category costs you on average. Finally, compare your total average spending to your earnings, and if there's not a lot of room left over to sock away money for a down payment on a home, make changes to free up more cash.