Step One For Home Buying: How To Save For A Down Payment
For many first-time home buyers, the most important thing to focus on has to be saving enough for a down payment for the right house. Even for people who have been frugal and saving for years, cutting out extraneous purchases, eating in instead of out, avoiding travel and vacations, saving can be tough.
Although difficult, saving for a down payment is the most crucial step in preparing to buy a home. Some people even find it helpful to pick a second part time job to help close the gap between their current savings and where they want to be a with a downpayment.
In this guide, we’ll take you through everything you need to know in order to help you save for the down payment for your first home!
Saving in a Changing Market
It’s fairly important to realize that even if you’re reasonable about saving for a mortgage and growing your down payment, there are some market factors that may be working against you.
As home prices continue to rise, your down payment must grow to keep up with rising home prices.
It’s not unheard of for home price to change rapidly over a relatively short period of time. With housing inventories being low and the rise in home prices, on average your down payment will have to grow $6,500 more year over year in order to keep up with the rise in prices.
From a monthly perspective, this means you’d have to save between $120-$300 more per month in order to keep up with rising prices.
For some first time home buyers, the prospects of owning their own home can seem dim, with many market factors seemingly making the goal harder and harder. Affordability obstacles are a chief obstacle, according to a home buying survey conducted amongst first-time home buyers. One in three said that they were expecting the home buying process to take close to 5 years, and less than two thirds of those surveyed owned any property at all.
Historically, home ownership among millennials is at an all time low. Part of this decline is an issue with saving.
Without unexpected good fortune or drastic improvements in your personal situation, it’s crucial to realize that saving for a home will necessitate some sort of sacrifice or increased effort.
Financing Options
All hope is not lost however, and there an increasing number of borrowing options being made available to first-time home buyers who might otherwise not be able to purchase a home. There are number of growing programs that do not require 20% down. Some of the notable programs are offered by the Department of Veteran Affairs, the Federal Housing Administration, the Department of Agriculture, and other private mortgage insurance companies. Working with these programs can allow home buyers to put down as little as 3-4% on their first home.
Exploring these options means you may be able to purchase a home sooner than you anticipated and may make all the difference in the world.
For first time home buyers, the most important move you can make is making sure that you’re doing everything you can to grow your down payment. While rising home prices may make this feel like you are chasing your tail, there are a growing number of programs that can help you make that dream a reality.
Don’t despair! With hard work, determination, and savings you can build the downpayment to purchase your dream home in the very near future!