If you plan to finance your new house, your first step is saving for a down payment. This can be one of the most challenging steps in the whole home-buying process, and in fact, is increasingly preventing younger buyers from entering the market. With school and credit card debt, rising home prices, and declining career opportunities anchoring them down, more and more potential homebuyers are finding themselves stranded on an endless sea of rentals, or even worse, stranded at Mom’s.
Down payments for U.S. citizens range from 3 to 20% of the total price, while foreign buyers can expect to put down at least 25%. A lower down payment will result in higher interest rates, as will low credit, if you can secure financing in the first place given shortcomings in both these qualifications. But even in the face of such seemingly insurmountable odds, the dream of homeownership doesn’t have to be a pipe dream. With a little discipline, patience, and our seven ways to save for a down payment, you can pull up the anchor of perpetual renting and set sail for your new home.
Ways to save for a down payment – Pay Off Your Credit Cards
This can seem like a daunting prospect, but getting out of credit card debt can be easier than you think. The avalanche technique is the best way for most debtors to go about it. This involves paying off the credit card with the highest interest rate first. When it’s paid off, apply the money you’re now saving to the card with the next highest interest rate, and repeat, exponentially speeding up the time it takes to pay off each card until you’re finally free.
Ways to save for a down payment – Automate Your Savings
Setting up a savings account might seem like an obvious step in saving for a down payment. But automating it is a good way to maximize its success. By having a portion of each paycheck automatically funneled into your savings, you can ensure a steady growth rate and less hassle on your end.
Ways to save for a down payment – Take Advantage of Aid Programs
There are several programs in place to help first-time homebuyers come up with down payments. Government services like Fannie Mae, various non-profits, and state assistance are all available to help first-time mortgage borrowers raise the funds.
Ways to save for a down payment – Use Your Retirement Funds
If you’ve never owned a home, you can tap your IRA for up to $10,000 for a down payment. Married to another first-time homebuyer? Make that $20,000.
Ways to save for a down payment – Have a Garage Sale
Most people have an unexpectedly large stash of unused, even forgotten belongings just taking up space. You might be amazed at what you find accumulating dust in your attic, or moth holes in the back of your closet. A garage sale can be a great way to free up space, lighten the load of your future move, and add anywhere from a few hundred to a few thousand dollars to your down payment savings.
Ways to save for a down payment – Commit to Stashing Windfalls
Many people have a hard time not spending when large sums of money come their way all at once. But by committing to stashing periodic windfalls like tax refunds, bonuses, and monetary gifts, you can make serious contributions to your down payment, potentially subtracting months or even years off your timeframe.
Ways to save for a down payment – Safeguard Your Savings
Your savings can be well on its way to meeting your down payment goal and suddenly be all but wiped out by a crisis. Medical emergencies, car problems, getting laid off: no one’s immune to life’s misfortunes. But setting aside an emergency fund before you start saving for a house will at the very least reduce the impact they have on your savings.
Orlando Homes For Sale is here to help you through every step of the home-buying process, including the step of saving for your down payment. Our seasoned professionals can help you determine how high to set your goal, and how best to reach it in accordance with your timeframe and budgetary needs.