Strategies for Saving Up a Down Payment

While minimum down payments have decreased, it is best to have at least a 20 percent down payment before purchasing a home in order to truly take advantage of the lowest interest rates, inexpensive monthly mortgage payments and overall savings, according to Betterment.com.


Prospective homebuyers also need to take into consideration other closing costs, like appraisal, private mortgage insurance and property taxes. You should also make sure you have an emergency fund and enough savings for potential home repairs, in addition to your down payment, before purchasing your home. Therefore, it is important that you are serious about saving your money before even considering buying a home even when the real estate scene in Malaysia is at its lower point these years.


Read these tips for saving up for a down payment, as well as other closing costs, home repairs and your emergency fund.


Open a Savings Account

If you are currently only using a checking account, open a savings account at the same bank or credit union. Using one financial institution is much more convenient, since most banks and credit unions allow you to transfer funds back and forth from accounts electronically and instantaneously. You can easily
move money into savings from your checking account online without visiting a physical bank. Savings accounts also tend to have a much higher interest rate than checking accounts, so this is an easy method of saving money while gaining more in interest.


Start a Budget
You can create a budget on a spreadsheet, according to The Simple Dollar. Write down your monthly gross income, then subtract taxes and other regular monthly costs -- like rent, gas, utilities, transportation, car payments, credit car bills and student loans -- from your paycheck. Once you have subtracted those steady costs, you can see how much money you have left each month and determine how to spend or save it.

Begin by tracking your spending for two or three months, writing down your restaurant, entertainment, parking and clothing expenses. You will be able to quickly see how much money you take in and how much goes out on a monthly basis and determine where costs can be cut. Income and expenses tend to be about the same from month to month, so the only way to start saving more money is to either bring in more money or change your spending habits.


Change Your Spending Habits

Determine if there are any costs that you can cut from your day-to-day life. For example, are you subscribed to any monthly services that you don’t really need? Do you really need to buy fancy coffee from the coffee shop every day or can you simply make coffee at home and bring it to work in a travel mug? Can you decrease the number of times you go out to eat at restaurants every month? Can you cut out going to the movies on a weekly basis? Once you change these spending habits, you can really start saving money. Don’t be afraid to be ruthless in cutting costs from your budget. Ask if each and every dollar is justified.


Bring in More Money

Those that save the most money are people who have multiple streams of income. If possible, take on an additional part-time or even full-time job. Consider freelance writing or selling any clothing or belonging you no longer want on websites like eBay. You can also start your own side business to earn more money. Starting a business could be financially risky, as many businesses fail. However, starting a successful business is one of the best ways to build your savings.


Check Interest Rates

Interest rates differ vastly for credit cards, saving accounts, car loans and other types of loans and accounts. Therefore, it is important that you go through every bill and account and check the interest rate on each to determine if you can do better. For example, if you are consistently paying off your credit card payments, then you should call your credit card company and tell them that you want a lower interest rate. You can easily achieve a lower rate just by asking.


With car loans, it often makes sense to prepay your debt, but many loans use a sum-of-the-digits interest calculation, in which case, prepayments are a less attractive option. Auto lenders are exempted from rules that mortgage lenders are subjected to, which means that auto loans are less regulated. If
you are paying really high interest on your car, it might make sense to sell it and buy a less expensive used car instead, especially if you want to focus on saving money for your down payment right now.


Check Your Credit Score

Your ability to borrow money for your home is closely linked to your credit score. Therefore, it is crucial that you have strong credit. Check your credit score on a regular basis to make sure that it does not have any errors and to know and understand where you stand and if you need to improve. Make sure that you check your credit report for factual errors or out-of-date items several months before you apply for your mortgage, so that you have enough time to take care of any errors or disputes before getting pre-approved for your home loan.


Accept Gifts

There is another source of savings that is often overlooked and that is gifts. You are allowed to use gifts from parents, relatives and friends for your down payment. In order for money to be recognized as a gift, the donor must sign a gift letter, explaining that there is no expectation of repayment or interest.

There are also down payment assistance programs that help first-time buyers purchase homes. While some offer interest reductions and tax benefits, others offer grants that don’t need to be repaid. Look into these assistance programs and determine whether you fit the qualifications before moving forward with applying for grants or gifts.