Saving Money for a Down Payment

Down Payment

You have been waiting for this day for a long time, building your dream house, you are ready to take the plunge, now what?  It is never too early to start saving for your down payment.  The amount you want to spend on building your new house will dictate how much you need to save.

Saving for a down payment requires a substantial amount of money and typically is saved over a short amount of time (several months to several years, the sooner you start saving the better you will be and the smaller the impact on your monthly budget).

How much do I need to save

The first thing you want to do is call us, we will help walk you through the design you are looking for and establish price ranges.  Once we sit down and go through this it will give you a better idea of what you want and how much it will cost you.  We will then get you in contact with a great lender that will help you figure out how much house you can afford based on what you want to build and how much money you will need for your down payment.

Let’s say you need to save $45,000 towards your down payment.   First we need to figure out the timeframe in which you are looking to build your new home.   Also consider that the total amount you need will include your savings and the equity you have built in your existing home.

If you are planning ahead and are looking at a time frame of 5 years down the road you will need to save $9,000 a year.  If you are looking for a shorter window, then obviously you will need to save more each year.


We are talking a significant amount of money; this isn’t just going to magically appear (most of the time it won’t anyway).  The decision now comes down to finding a way to earn additional income, cutting back on existing expenses or a combination of both.  If your goal is $9,000 a year, this equates to $750 a month.  Sit down and make a list of your current expenditures, where is there room to trim?

  • Can you carpool to work or take public transportation?  Selling a vehicle will save a car payment, insurance, gas and maintenance.
  • Find ways to cut your energy bills (LED lightbulbs are about 4 times more energy efficient, utilize timers and power strips (not huge savings but every penny adds up!).
  • Do you have a gym membership?  (walk or run out doors, use free weights at home)
  • Reduce your cable bill (go to the basics if you need cable)
  • Look at your monthly entertainment expenditures (eating out, going to the movies, etc).  Cook home more often and rent a movie, save going out to eat and a movie for very special occasions.
  • Vacations, can you stay local instead of flying somewhere?  One less weekend away?
  • Look at your cell phone plan, can you go to a lower plan, use less data each month?
  • Clothing and Grooming expenses (do you need a new outfit each month or need to get your haircut every 2 weeks?  Can it wait one or two more weeks?)
  • Do you smoke or drink regularly?  Can you eliminate a pack a month (or more) or eliminate a 6 pack or two a month?

All of these things help free up money in your budget to set aside and put towards your nest egg.  What other ideas can you think of once you really put your mind to it and look at every dollar you spend each month.  Now is the time to cut everything you can.  Once you cut it out soon you won’t even miss it, it will become a normal way of life.


Now that you have identified where the money is going to come from it is time to decide how to save it.  Sounds simple right?  Sometimes it is, sometimes it isn’t.  The best way to save is to set up a payroll savings plan that automatically goes into a separate account.  You can set up a new savings account with your bank, make sure that it isn’t tied to your checking account, this makes it too accessible.  Once you have your new account set up, set up a new direct deposit automatically from your paycheck.  This way the savings is invisible to you, what you don’t see you won’t miss.  This will also help remove the temptation to revert back to your old habits. Remember the prize at the end of all of this, your new home!


There are several possible times a year when you can bank windfalls.  Think of tax returns, annual bonus at work, gifts (yeah Birthday and Christmas, thanks mom and dad), large commission checks, money from an annual yard sale.  These larger deposits add up and help you save quicker to achieve your down payment goal.

Emergency Fund

Ensure that before you start saving for your down payment on your new house that you have an established and well-funded Emergency Fund.  You never know what life is going to throw at you so it is best to be prepared for the worst case scenario.  Things come up and go wrong, if you plan ahead for these then you won’t be dipping into your new house down payment fund if your car breaks down, you get sick or you are temporarily unemployed.

Saving money takes a lot of effort up front, once you get into a routine it becomes old habit.  A few months in you won’t even miss the things you gave up and when you move into your new dream house you will feel accomplished and know all of the cost cutting was worth it.