6 Tips to Save for a Down Payment in Austin

If you’ve set your sights on a home in Austin, it’s safe to say that you have a lot of exciting things to look forward to. 

Whether it is joining one of the fastest-growing tech industries or moving for the never ending stream of mouth-watering barbecue, Austin is an exciting place to call home. 

If you’re just starting your homebuyer journey, your first thoughts should be about the down payment. Austin has been growing rapidly, and the home prices reflect that. So to ensure you’re ready to buy a home here, setting aside the necessary down payment should be at the top of the list. 

But what is the best way to do that?

Below, our team from Prevu Real Estate breaks down six easy tips to help you save for a down payment in Austin, Texas.

Tips to save for a down payment in Austin

• Decide where you want to buy
• Make a budget
• Set up automatic savings
• Focus on paying off loans
• Consider a high-yield savings account
• Organize your spending
• Consider a career change for a higher income

Decide where you want to buy

Where you choose to live in Austin may determine everything else on your down payment to-do list. 

Though Austin is a pricy destination overall, different areas command different price tags. A significant first step can be to explore Austin’s neighborhoods and see which places you like most. You may fall in love with the tranquil streets of Tarrytown and the cozy single-family homes, but those are some of the most expensive real estate in Austin.

Maybe you’ll enjoy the electric vibe of Downtown Austin and get enamored with the sleek new condos springing up on the scene. These can be more varied in pricing and more affordable than a house. 

Location is one of the biggest factors affecting price in Austin, so do your research and get to know your favorite parts of the city. 

Make a budget

Once you know where you’d like to live, you can create a budget and savings plan. 

Browse listings in your area of choice and see what the prices are. Take note of the numbers that you think may be attainable for you. Mortgage lenders traditionally like seeing at least 20% of your purchase price ready to be used for a down payment, so consider setting that as an initial goal plus extra for closing costs. The greater the down payment, the better chance you have of securing an attractive mortgage.

But keep a few essential things in mind as you start making your budget. 

Austin ranks highly among coveted cities, and the home prices are likely to grow. So when you decide on a price range, plan for those numbers to be higher in the future.

You can also set a separate savings goal as an emergency fund to help make a larger offer. A backup savings plan might allow you to outbid the competition if you find the perfect home. It can also come in handy when handling closing costs.

Set up automatic savings

Though it may seem simple, saving money can be a complicated process, especially when planning for the long term.

Surprise expenses may come up, or you may fall in love with Austin so much that you’ll want to fly back and splurge on the live music scene. Set up a way for your savings to add up automatically. This way, you won’t have to remember to make that transfer and can sleep easily knowing that your savings account is slowly growing.

Once you choose an amount to be deducted, stick to it or increase it. This way, you can have your first reliable pillar to build up your eventual down payment.

Focus on paying off loans

Monthly payments on outstanding loans or credit card balances take away from the amount of money you can borrow for a mortgage.

Consider paying down any higher interest loans as quickly as possible. Of course, it depends on your situation, but improving your debt-to-income ratio by paying off other debts can help to increase your borrowing capacity when mortgage lenders evaluate your creditworthiness. 

As a result, there is a chance you may be able to qualify for a larger mortgage with a smaller down payment for the same property.

Consider a high-yield savings account

If you’re starting with sizable capital or reaching a point where you have significant savings, you can consider opening a high-yield savings account.

It’s convenient to open a savings account in the bank where you hold a checking account since it’s easier to move and withdraw funds. But a high-yield savings account can offer a much higher interest payout than traditional savings accounts.

Take the time to research and find a bank that works for you. Many online banks offer rewarding accounts, but it may be harder to withdraw the money. Shop around your bank as well and ask what options they offer.

You can also choose a higher-risk route and invest your money into a brokerage account. This may be a worthwhile option for home buyers with a flexible timeline since you may have to weather a fluctuating market before cashing out. 

Organize your spending

As you start your savings journey towards buying a home in Austin, re-visiting how you spend can be another effective way to manage your financial goal. 

Consider cutting on expenses that you can do without. After all, you can put any extra money saved towards your future home in one of the best cities in the U.S. This can mean cutting back on travel and expensive outings or canceling a few subscriptions you might not have used for months. 

If you find ways to cut back, consider putting that money to use immediately and adding it to that automatic savings plan. It can be a great way to reward yourself for spending less.

Consider a job change for a higher income

Though this may be a scary prospect for those who love stability, it might be worthwhile to consider a job change as you embark on a home buying journey.

Owning a home comes with many expenses. You might need to spend on maintenance, renovation, or new furniture. Couple that with mortgage payments and property taxes, and you’ll have a hefty monthly bill to look forward to. Make sure your income can handle those expenses and give you breathing room if needed.

If you’re at the point where you’re ready to buy a home but the income limits are holding you back, consider changing to an employer that can offer you more. After all, Austin has a vibrant job market, and you might just find a pay increase that will super charge your savings.

If you’re committed to your current job but can benefit from an income boost, you can also consider starting up a side hustle. It can be a great opportunity to put any hobbies or interests to financial use. You can open up an online store or Etsy account to sell artisanal items or leverage talents for small consulting projects on Fiverr or Upwork to save up faster.