Tips to Save Money for a Down Payment
It is easy to say to yourself, “I could never save enough money for a down payment.” Although it is not always easy, the trick is to take it one day at a time.
While the conventional down payment is usually 20% of a home’s purchase price, there are exceptions to the rule. Check with a lender and see what your options are.
Even if you can get a loan with less than 20% down, maybe you decide that is not a good idea since you want equity in your home as soon as you purchase it.
Once you see your options you can put together your savings plan. For a starting point, we will say that you are interested in purchasing a home in the $150,000 range and you need a 20% down payment. That 20% down payment will cost you $30,000. Next, we will plan on when you want to purchase your future home.
Let’s say that you want to purchase your home in 3 years. Now we can come up with your three year plan to save for your down payment. We know that most payments are monthly and we want you to set up a monthly payment to your “Down Payment” fund. You have 36 months to save that $30,000.
That means you will have to save approximately $834 per month. Maybe math is not your thing and you want some help figuring out what you will need for a down payment. Follow this link for help online https://smartasset.com/mortgage/down-payment-calculator .
That is a large amount for most of us. It is easy to give up at this point, but it will be worth it in the end. The question we need to focus on is “What do we need to do”?
A good place to start is to cut out extra expenses. We all have extra expenses. Can you cut down your tv package, your cell phone package? Can you change your current living situation to save money? Maybe move in a roommate or move into a family’s home? Do you sell your car and use public transportation or ride a bike?
Maybe you do all that and still realize that you just don’t make enough money. What can you do?
There are other options. Do you have a family member you could ask for a loan or a gift? Maybe you can set up a gofundme account to raise money. Do you entertain the option of getting a second or third job temporarily?
Another option, although not always a recommended one and this should definitely be talked over with your financial advisor, is to borrow from your retirement savings. Depending on how your retirement savings is set up and what you are using it for, there can be penalties or you might have to pay taxes on the money you take out.
As you can see, saving for a down payment is not easy, but it is possible. If you desire to own your own home, don’t let the obstacles stand in your way, keep moving forward. If you are willing to keep taking small steps each day, it will add up to big things!