Saving for a down payment, while second-nature to some, is a real challenge for a large number of hopeful home buyers. If you’re one of the many people with enough income to service a monthly mortgage, but no money for a down payment, a little self-control and sticking to a realistic savings plan can make all the difference.

The Basics

Buying a home usually requires saving for three up-front costs. In addition to the down payment, closing costs must be paid. While these expenses vary depending upon where you buy, you can count on at least $3,000 - $5,000 for closing costs. You’ll also need to demonstrate that you have some reserve funds to protect against potential short-term cash-flow problems. Ideally, you should have at least three months’ worth of mortgage payments available after closing. These funds aren’t disbursed, but lenders like to ensure that they are available, if needed.

Before creating a savings plan, take a deep breath and an honest look at your current financial situation. Review both assets and liabilities, create a budget and, based upon your discretionary income, decide how much to save monthly. If you find that your lifestyle doesn’t leave much in the bank, it’s time to determine which expenses you can reduce or eliminate.

When evaluating your assets, don’t overlook any source of funds. Checking and savings accounts, CDs, mutual funds and savings bonds, stocks, or an IRA can be counted toward your down payment or the reserve funds requirement. Some 401K plans even allow employees to borrow against them; those proceeds can be used toward a down payment.

Reluctant Savers

If saving is tough for you, begin with the mindset that you will own a home and consistently visualize your down payment amount. Keep a separate savings or investment account for your down payment. Don't tap into this account until you are ready to buy. If new golf clubs or a hankering for designer shoes gets in the way, opt for an automatic savings withdrawal from your paycheck. It's easier to save when you don't have money burning a hole in your pocket.

If an automatic paycheck withdrawal won’t do the trick, look into a home lease/purchase as another way of saving for a down payment. Each month, your landlord will credit a portion of the rent toward the purchase price of the home. However, only the portion of a rental payment that exceeds the fair market rent can be applied to the down payment.

Penny Pinching

If you’ve got the will to save, but never seem to have any money left at the end of the month, consider ways that you can cut back. Do without your daily drink purchased at the coffee shop. Saving $2 or more per day on gourmet coffee will enable you to put an extra $60 per month toward a mortgage payment or more than $700 a year toward a down payment. If you can cook, eat at home more often. Those restaurant tabs can add up.

Stock up when there is a sale on products that you normally use such as toothpaste, paper towels or canned goods. Buying a $2 item that is on sale for $1 is a guaranteed 100% return on your money. That beats the stock market any day!

Clipping coupons isn’t anyone’s favorite pastime, but each dollar adds up. Look for supermarkets that will double your savings. Most coupons arrive in your Sunday paper or can be found online on the newspaper's website. Consider shopping at discount stores such as Costco or Sam's Club where you can buy in bulk. Those prices are tempting, but avoid buying quantities that you will not use. After all, how many aspirin can you really take in a year or two?

Be cautious and thrifty when you order services. Always get three competing bids. Assuming the quality is the same, pick the lowest price one. When buying items on the Internet, consider using online shopping bots such as www.mysimon.com, www.shopping.com, www.pricegrabber.com, or www.shopzilla.com. Shopping bots compare prices of items from several different websites and include tax and delivery.

Do Away With Debt

High credit card interest rates are the achilles heel of every would-be home buyer. Pay off your credit cards monthly. If you don’t, you’ll find that within a couple years, the interest you’ve paid could have added up to a substantial down payment. The best choice is to pay cash for everything you buy and stick with your budget. If you have more self-control, consider using a credit card that offers cash back like the Discover card. Again, only do this if you pay off your cards monthly.

Last but not least, if you're getting married, skip the usual gifts in favor of a down payment registry. More than half of all first-time home buyers receive funds from relatives to assist with down payments.

If you’re single or already married (and have the fondue sets and china to prove it) take some of these money saving suggestions to heart. The small sacrifices you make now will be repaid tenfold when you open the door to your first home.