Down payments can look impossible. Tens or hundreds of thousands of dollars—your stockpiled savings look downright paltry by comparison. I’ve heard many people say, “I’ll never be able to own,” or “Seattle’s just too expensive.” Much of the time, those people are thinking about the down payment.
Down payments in Seattle are expensive. For reference, here’s how our city stacks up against a few other major metropolitan areas.
The key to making a down payment: a savings plan. This takes the form of five pieces:
1. Commit to saving a regular amount
Put aside a portion of every paycheck. Pick a fixed dollar amount or percentage, and put that money toward your down payment. No exceptions. This will give you a timeline to home ownership based on your savings rate: five years, or ten years. The end, however distant, is now in sight.
2. Minimize spending
Saving a large amount of your paycheck can squeeze other parts of your budget. To give yourself a little financial breathing room:
Kick your caffeine addiction, or at least learn to brew your own coffee. A couple espressos a day can take $50/week out of your budget.
Bike to work. You’ll save on gas, parking, and maintenance. As a bonus: it’s healthy and better for the environment.
Order off-brand products. Stop paying for a name when a cheaper but just as effective alternative can make life easier.
3. Pay off debts
The interest on student loans and car payments can feel like quicksand. If you can, accelerate your payments—it might cost more now, but you’ll save money in the long run if you don’t have interest working against you. Two great strategies for paying off debt: the Snowball Method and the Avalanche Method.
4. Make “extra” savings
Once you’ve got your debt under control, you can start making extra contributions to your down payment fund. Don’t reduce your regular savings—think of this as a bonus. In fact, bonuses and tax refunds make some of the best candidates for this “extra” saving. If you find yourself with unexpected income, send some (or all) toward that future down payment.
5. Be patient
Your savings won’t blossom overnight. But in five or ten years, if you stick to your plan, those down payments will look very different.