How to easily saving for a down payment
Do you dream of becoming a homeowner? One of the most important things to consider when purchasing your first home is how you will save for the down payment. Many people put off homebuying entirely because of the overwhelming thought of how they will come up with the down payment. The good news is that many tips and tricks can make saving for a down payment easier and more straightforward.
Before exploring easy ways to save for a down payment, though, let’s go over some quick facts about how much you may need for the down payment itself:
Buying a home doesn’t always mean a 20% down payment. So, first things first, talk with your lender about your options, because you do have options.
There are two loan programs that will allow you to buy a home without a down payment: Veterans Affairs and U.S. Department of Agriculture.
Some conventional loans with loan limits allow someone to buy a house with as little as 5% down by requiring buyers to have private mortgage insurance, or PMI, which can be eliminated after the loan amount falls below the 20% threshold.
The Federal Housing Administration offers first-time homebuyer loans, which requires a 3.5% down payment. It also may have limits and PMI requirements.
Overall, the amount you need to save for a down payment differs significantly based on your lender and credit qualifications. Reach out to your lender for more exact information.
Now, let’s examine five ways to tuck away money for a down payment:
Use your tax refund
Set up a savings account that’s not directly linked to a debit or credit card, and place the full amount of your tax refund into the account. You can also set up a percentage of earnings from your job to go directly into this savings account.
Sell stuff you don’t want
Yard sale season is here. How much of your stuff do you actually need? There are also many apps that allow you to easily sell unwanted items. A few examples are OfferUp, eBay, Poshmark and even Amazon. Surely, you have plenty of items in your home that you don’t use, so why not sell them online or at a yard sale? Bonus: All the things you sell will make packing for the new home that much easier.
Cut off monthly recurring costs
Unsubscribing to cable, music services and gym memberships will save you a lot of money to put toward your down payment.
A great way to see your total monthly recurring subscriptions and costs is to go through your bank statements. Seeing the charges will help you understand how much you mindlessly spend on subscriptions. You may even see charges for services you don’t even use.
No eating out
Still have that bank statement out? Check to see how many charges are restaurant-related. Now add the total. Not eating out, or even limiting how often you eat out, will save money.
Start making grocery lists and sticking to them. Skip the drivethrough coffee and latte runs and make your java at home. Make more slow-cooker recipes or quick meals. Being more proactive will help you to save more.
Look for a second income
Leveraging your extra time to make more money is one sure way to save for a down payment in record-breaking time. With technology, there are many flexible ways to make extra money.
You can Uber or Lyft in your spare time. You can deliver food using apps such as DoorDash or Postmates.
Love to craft? Use your talent to make items to sell on sites such as Etsy. The list goes on.
If buying a home is important is to you, you will make the necessary sacrifices and discipline yourself accordingly. Have a plan, write it down and stick to it. Do not let the down payment be what’s keeping you from being a first-time homeowner.
Be smart and mindful with your spending, and you will be well on your way to becoming a homeowner in no time. Rosa Gregg is a Realtor with Rose & Womble Realty’s Shore Drive office in Virginia Beach and a member of the Hampton Roads Realtors Association. For more on HRRA, go to www.hrra.com. Contact Gregg at rgregg @roseandwomble.com, 757-202-6994, or www.RosaGregg.com