Worried About Saving Enough for a Down Payment?
To get a mortgage, you'll likely need a down payment -- cash you bring to closing and pay the home seller. The bigger your down payment, the less you have to borrow to buy your home.
Lenders usually want you to make a down payment of at least 5 percent, although some special loan programs will let you put down less money. Many lenders would like to see more.
Saving a down payment is hard. Try these nine tips for building down payment funds:
- Pay yourself first. Enroll in an automatic savings plan where you bank. Have a certain amount transferred from your checking account to a dedicated savings account each month. It provides some discipline, and you may use a money market type of account to earn higher interest.
- Borrow from your retirement plan. Verify if your company has profit sharing plans and inquire the process and provisions with Human Resources or Payroll departments.
- Move. Living in a cheaper apartment or with relatives while accumulating your down payment can help you get your money faster. More affordable rent may balance off a longer commute to your job. If you are starting or considering changing careers, you may want to consider an area with lower living costs.
- Reduce other high-interest rate debt. Paying off credit cards will take some of your savings, but you will not pay the high rates usually found with credit cards.
- Make a deal with the seller. Sometimes a seller is willing to help sell their home by taking a second mortgage for part of the purchase price. Be careful if you consider this, and make sure a qualified attorney looks at all the documents.
- Sell some of your investments.
- Get a second job and save your earnings.
- Skip a year's vacation.
- Borrow from your parents. Many parents are willing, or even anxious, helping their children with the purchase of a first home. Be respectful of their generosity.
When deciding how much to spend on your down payment, leave yourself money for the things you'll want to do when you move into your new home. New carpeting, new furniture, or improving the landscaping all take money. It would be best if you won't stretch yourself too thin.
Wondering how much you'll need to buy a home? Contact us, and we'll discuss your options.