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Deciding that you want to buy a house is an exciting time in anyone’s life. But now you’re left with the not-so-exciting process of figuring out how you’ll come up with a down payment.

If just thinking about coming up with a large chunk of money makes you nervous, you’re not alone. Inflation and increased costs of living have been tightening budgets all over the world, meaning squirreling away money is getting more difficult.

Personal finance Twitter will tell you that the problem is your morning coffee or your work ethic, and you could already own a house if you just drank water and worked 60-hour weeks.

But that’s unrealistic, and it paints a miserable picture.

Truth be told, saving for a down payment on a house can be a long process. You’ll still need a place to live while you’re saving, and for many people that means putting most of their income towards renting – which can be just as expensive as a mortgage.

It might feel like a catch-22, but don’t lose hope just yet. Patience is of the essence, and so is knowledge. Here are some ways to plan for your mortgage without giving up coffee and avocado toast.

Plan ahead and do the math

The first step to saving for a house is having an idea of how much you’ll need to save for a down payment. But how much will you need to put down?

You may have heard that you’ll need to pay 20 percent of the cost of your home up-front. Twenty percent is a good number to shoot for, but it’s not always necessary.

According to the National Association of Realtors, the median down payment for first-time homebuyers in the United States in 2021 was just 6 percent. In the U.S., minimum down payment amounts will vary by region and the type of mortgage you qualify for, so make sure you do your research. This article by US Bank a good place to start.

In Canada, minimum down payments range from 5-20 percent and vary by the price of the home you’re looking to purchase.

Do some research and come up with a number. Having a number gives you a goal to work towards, which can help you figure out how much you’ll need to put away and for how long.

For example, let’s say you’re looking to buy a $640,000 house with a 10 percent down payment of $64,000. If your budget allows you to put $1,000 per month into a savings account, it will take 5.3 years for you to come up with a 10 percent down payment. If you’re able to put $500 per month into a savings account, it will take 10.6 years

If you’re looking to buy a home in the next few years and you’re starting your savings from scratch, your budget might allocate more towards savings. If you already have a savings account and you’re willing to wait, you can be a little more flexible.

Everyone’s timeline is different – be realistic with yourself, and most importantly be patient.

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Be mindful about your habits

It’s amazing how much money we spend without even realizing it. No, seriously. Take a look at your bank statements.

Budgeting and saving can be hard – but there’s psychology behind it that can help.

We generally have a hard time with the idea of saving because we associate it with self-deprivation – something very few of us are good at. But saving for a mortgage doesn’t mean you need to walk through the next few years of your life under-caffeinated with no social life.

Saving has more to do with the way you think about money than the actual amount of money you make. So, the trick of any successful budget is the same as any successful diet or New Year’s resolution: mindfulness, commitment, and everything in moderation.

Maybe it’s budgeting for three takeout meals per month instead of three times a week, limiting your Uber rides or cancelling a streaming subscription you’ve forgotten about for a few months – there are lots of ways to cut down on expenses without cutting them out of your life entirely.

Everyone deserves a treat now and again, so when you’re sitting down with your bank statements looking over your spending habits remember to be self-aware. You don’t need to live without takeout meals, but you probably don’t need to eat them every night.

If you’re not sure where to start, try the 50/30/20 rule. Popularized by U.S. Sen. Elizabeth Warren, this budgeting technique suggests splitting up your after-tax finances into three categories: needs (50%), wants (30%) and savings (20%).

With the 50/30/20 rule, you’re covering your living expenses, setting money aside and giving yourself wiggle room for the things you enjoy.

See if you qualify for a first-time homebuyer program

If you’re crunching numbers and still coming up to dead ends, don’t panic just yet. There’s still hope.

First-time homebuyer programs are a great resource to help you through the mortgage process– whether you need help coming up with a down payment or affording your loans.

Just about every state has some kind of program to help first-time homebuyers, so it’s worth looking to see if you qualify for assistance. For example, the Michigan State Housing Development Authority offers two loan programs and a down payment assistance program.

Mortgages offered through Michigan’s first-time homebuyer programs include features such as down payment requirements of only 1 percent of your loan and fixed interest rates. In order to receive down payment assistance, you’ll need to attend a homebuyer’s education course – but that’s a small price to pay if you need the extra help.

First-time homebuyer programs will vary by region, so make sure to check out Nerdwallet’s list of programs to see what your state (or the state you’re looking to move to) offers.

Contribute to your savings in bulk

Budgeting can be hard, and sometimes emergencies come up that make you dip into your savings. Life happens to everyone – don’t sweat it too much.

One effective way to boost your savings for a down payment is to do it in bulk.

Maybe you know your grandparents will send you a card with $100 over the holiday season, or you’ll be getting a larger tax return this year.

Instead of treating that money like extra cash to splurge, try putting it directly towards your dream house savings. If you’ve been in a budgeting rut for a while, throwing that extra cash towards your new home will make a huge difference and get you back on track.

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Heal your credit score

Credit scores can’t be ignored when you’re talking about saving for a house, sorry.

You probably already know that your credit score impacts whether you’ll be able to qualify for a mortgage – but did you know having better credit can save you money when it comes time to fork over a down payment?

With a Federal Housing Administration (FHA) loan, homebuyers with a credit score between 500-579 are required to put at least 10% down on their homes. However, that number drops to 3.5% for homebuyers with a score of 580+.

If you’re looking to buy a $500,000 home, having a better credit score would save you $32,000 up front in this situation.

If your credit is terrible, don’t panic. Bad credit can be easily fixed in a few months. Here are some tips for boosting your credit:

  1. Make payments on time, even if you’re only making minimum payments.
  2. Keep your utilization rate under 30% by spending less and expanding your credit limits.
  3. Avoid closing accounts – the longer your credit history is, the better.
  4. Consistently chip away at revolving credit balances until they’re paid off.

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