Creative Ways To Save For A Down Payment
Written By: Jaymi Naciri
Sunday, February 18, 2018
Youd love to buy a house, and if it werent for that pesky down payment, youd be sitting pretty in a place of your own, right? Youre not alone. Not surprisingly, the "top challenge for would-be homebuyers is thedown payment requirement," said The Mortgage Reports. In a recent study, "Over half of potential buyers claimed saving a down payment was a bigger issue thancredit scores, income needed or housing prices."
There are some creative ways to get there.
Look for down payment assistance
Many homebuyers dont realize that these programs even exist. "Down paymentgrants are designed to help eligible buyers bridge the gap between their savings and the required down payment for a mortgage," said The Mortgage Reports. "This money doesnt usually have to be repaid."
Grants are available through the Department of Housing and Urban Development HUD and typically have eligibility requirements that are tied to income. In addition, "You must be a first-time buyer purchasing a primary residence," they said. You can check for available grants here.
Save your pennies
Every little bit helps Get used to paying for things with cash, which is another tip financial analysts recommend to keep track of spending. At the end of the day or week, put aside any change. Youll be surprised how it can add up over a few months.
Shop for a better savings account
Some banks offer special rates or even kick in money if you open a new account and maintain a certain balance. If you already have a good head start on your down payment, this could be a great way to get a bump. Also pay attention to any fees you are currently paying at your bank just to have your savings and checking accounts. If you cant negotiate to get them removed, it might make sense to open fee-free accounts elsewhere.
Among the best out there: "Discover Online Savings has no minimum deposit requirement and offers a competitive APY of 1.40. In addition, theres no monthly fee and no minimum balance requirement," said NerdWallet in their review of the best savings accounts of 2018. "Discover is a decent choice for simple, stress-free savings." Discover also offers bonuses that are tied to a 15,000 minimum deposit.
Do automatic transfers
Setting up an auto transfer from your checking to your savings on payday is a >Get a gift
For many types of loans, the down payment can come via a gift. Just make sure you know the rules so you dont run into trouble. "Even though lenders do allow gift funds, they also require mortgage applicants to disclose the source of these funds," said Cherry Creek Mortgage. "There are specific rules for using gift funds as a down payment. For starters, your lender will need information about the donor. Donor requirements vary by lender and mortgage program. Some programs only allow gifts from a blood >Save all raises and bonuses
If you get a raise or a bonus during your saving period, dont celebrate by blowing it on a new living room set. Pretending it didnt happen and socking the money away will pay off in the end. "For a set period of time, consider saving all extra income you receive from work," said Quick and Dirty Tips. "For instance, if you get a 3 raise, increase your down payment savings percentage by at least that amount. Or if you get quarterly or annual bonuses, transfer the full amounts to savings."
Shift some money toward repairing your credit
That might seem counterintuitive if youre trying to get together as much cash as possible to buy your house, but it might just be that doing a little credit repair can improve your buying position, which could lower your interest rate and lower the amount of money required by the bank for your down payment. A conversation with your lender or broker and a detailed look at your credit history may yield some surprising suggestions.
This is a great time to take a good look at your stuff and decide whats going with you, and whats not making the trip to your new place. "You likely have some used furniture you no longer use or old clothes that are no longer in >Call your cable, Internet, and phone providers
There may be lost money floating around out there. Bundling your services with one provider can create dramatic savings. It might also be time to look at new providers - just make sure you wont incur a penalty or cost when you move and have to have your services set up again.
Make your coffee - and your lunch - at home
"If there are two people buying one coffee each at 4 every day, or 8 total, that adds up to 240 per month So by getting a good coffee maker and putting it in a TO GO cup, you can potentially save more than 2,880 over the course of a year," said Blue Water Credit. "If you think coffee was expensive, add up all of those 12, 20, and 25 lunches at restaurants when you step out from work. Even if you only buy lunch three times a week, that could easily end up with 50 a week in savings per person, or about 400 a month, or 4,800 per year"
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