Saving for Down Payment Made Easy
- Sep. 24, 2015
- Shantell Russell
- Personal Finance
Interest rates are historically low and the job market is allowing many individuals to finally feel comfortable with their own finances. However, larger purchases, such as a new home, might be a bit more intimidating despite the improving economic conditions due to the need for a down payment. We've all heard that interested buyers should expect to put as much as 20 percent of the purchase price of a home down when looking to lock in a loan. In addition, a higher down payment also means a better interest rate. However, this chunk of change can't be found in between the couch cushions. Not very many people have this kind of money lying around.
Fortunately, there are many ways you can easily save for a down payment. If you are interested in purchasing a house, follow these tips for saving money to finance the purchase of the perfect home:
1. Open a Savings Account
The first step you need to take when deciding you want to become a homeowner is opening a specific account intended to build your funds. Head to your local bank and ask to start an account specifically to save up for a down payment. You should also consider goals and determine how much you want to deposit into the account each month.
Ask your bank about direct deposit options available to you. If you can send money directly from your paycheck to the account you will help build your funds even faster.
2. Bring in a Little More Cash
Trulia suggested making a little extra cash on the side by turning one of your favorite hobbies into profit. The Internet provides you with multiple platforms you can use to sell products and services to customers. You can use your profits toward the down payment on a new house.
Another way to increase your savings account is by selling some of your items. Go through your closets and any storage space and get rid of anything you haven't used in the past year. Holding a yard sale can leave you with extra cash.
Also, don't be afraid to take on a second job. Remember, saving for a house will require a little extra work on your end, and if you want to build up your savings quickly you will need to make a few sacrifices. Find something fun you think you would enjoy. If you are a bookworm, ask a local bookstore if they are hiring. Love to talk to people? Think about becoming a bartender or server.
3. Consider Your Current Living Arrangement
If you live in an apartment and have been a good tenant, U.S. News & World Report suggested asking your landlord to lower your monthly rental rate.
Moving to a smaller space or moving in with relatives are two other options you might want to consider. Your rent tends to be the most substantial spending you likely do every month and cutting it down or even out will help you reach your goal that much quicker.
4. Request Some Assistance
There are a plethora of people who might be willing to help you save for a down payment on a house. However, you will never know unless you ask them. Trulia suggested asking your family members to help save for a down payment. Have a birthday coming up? Wedding? Baby shower? Request your family and friends to provide monetary gifts you can use toward a new home in lieu of a traditional present.
However, it is important to also check with your lender to ensure you can use gift money toward a down payment. Some institutions will require letters that explicitly indicate the money is intended as a present.
Another place you might be able to acquire additional funds is through your employer. Some companies offer exceptional benefits that help workers afford homes. Speak with your human resources department and find out if a program exists at your place of business.
5. Borrow from a Retirement Account
In some instances, you can borrow some money from your retirement account without a penalty or any fees. This might not be the best option for everyone, but it is something you may want to consider—especially if you are just a tiny bit away from making the standard 20 percent down payment on the perfect house.
6. Get Creative
Another way you can save some money is by figuring out different ways to spend less money on your food, entertainment and other expenses. For example, instead of paying for cable every month, consider a subscription to a steaming website.
Also, cut down on going out to eat. Instead, try learning how to cook a few new interesting dishes. It will be more affordable and fun to mix it up a bit.
Buying a home is a substantial investment. However, with a little premeditation and creative saving, you can make your dreams a reality.