5 questions to help you identify ways to save money for a down payment on a home.

You’ve probably heard that a 20% down payment on a house is a smart money move, but do you know why? A primary reason people put 20% down is because it puts the loan-to-value ratio at 80% and eliminates the need for private mortgage insurance (PMI), which runs between 0.5% and 5% of the mortgage value. Even on the low-end of that range, a $200,000 mortgage with PMI would cost a homebuyer an additional $1,000 a year. Clearly, a 20% down payment has financial benefits. If you’re wondering how to go about setting aside enough to cover 20% of a home purchase, the following questions can help you identify where to save money.

What can I downsize?
One way to build up your down payment savings is to examine how you might cut some of your biggest expenses: housing and transportation. Would it be possible to reduce your living expenses by moving to a less expensive place? What about driving a less expensive vehicle?

Are there opportunities to share expenses?
If it’s compatible with your lifestyle, is it possible to reduce current living expenses by getting a roommate? Could you rent out a room on Airbnb? Could you save money by buying in bulk at a warehouse? Would a family phone plan result in monthly savings? Actively search for opportunities to cut expenses.

What side gigs are available to me?
Getting an additional part-time job, doing freelance work or working gigs such as pet sitting can all infuse your down payment fund. Yes, taking on extra work requires giving up some free time, but it can help you meet your savings goal faster.

Where can I cut expenses?
Look at your spending habits. Is there room to cut back on things like eating out, clothes and vacations? It’s not necessary to eliminate these types of spending, but you may find you can cut back on them and and still enjoy your quality of life.

Is it time to find a new job?
If your compensation doesn’t match the value you bring to your job, it may be time to find another one. Before you jump ship, use job posting and salary compensation websites, such as Glassdoor, to see what the market rate is for your work. If you’re underpaid, share your research with your employer and ask for a raise. If they’re not willing to pay market rate, consider looking for a new job with higher pay.

When you’re ready to buy a home, Consumers is here to help with the home mortgage process. Get started with our easy online application or by calling one of our lending experts at 800-991-2221.

Consumers helps more than 2,000 members finance land, first and second homes, and home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.