Homebuyers sure are lucky these days; they can buy a home with as little to no down payment. Indeed, you can get an FHA loan with 3.5% down payment or a conventional mortgage under their special programs for first-timers.
Don’t let a down payment pose a hurdle to your homeownership, especially if you can save up for it. We have rounded up some practical ideas to help you save for your down payment.
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Before you start any savings plan, know your timeframe for buying a home and always start with a budget to work around.
Set a price range for a home you can comfortably afford to pay for the down payment and the monthly mortgage amortization and maintenance costs. Say, a home with a price tag of $200,000 can have a down payment of $7,000 if at 3.5%.
Tip 1: Power Save
Take a look at traditional and modern ways to store your hard-earned money.
- Open a savings account. Find a bank that offers a higher savings account rate to grow your money. But be wary of too-good-to-be-true rates because they might just turn out to be that. Same with credit unions. You can seek out those that offer competitive rates. Ask your friends, co-workers or family members of credit unions that they can recommend.
- Automate your savings. Often the best way to save is to do it fast enough. There are finance apps that do the saving for you; they analyze your spending habits, how much you can afford to set aside for savings, and automatically transfer those amounts into a checking account. There are minimal costs in maintaining these apps.
- Take on a money challenge. A good example is the 52-week challenge, which in its simplest form can rack up $1,378 or in another increment up to almost $7,000 in a year. You can tweak your savings timetable, starting with the bigger amounts during the start of the year and working towards the lower amounts as the year ends.
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Tip 2: Automate (Your Bills)
If you can automate your savings, you surely can automate your bills payment. Enroll your biller, e.g. utility, insurance, credit card, and more in your debit card for auto-payment every month.
This not only spares you from withdrawing cash and spending it elsewhere, it makes you current on your accounts. Ultimately, you won’t incur late fees or accumulated charges especially on credit cards. It would be a plus on your credit report, too.
Tip 3: Invest
It certainly pays to have funds for investment, aside from the money you safely put in your deposit accounts. If you’re new to investing, research first about mutual funds, bonds, instruments or any type of investment that can be for short-term or long-term as you deem.
Remember, you won’t get rich overnight by investing and there is a risk to lose money as there is a chance to gain some. That’s why it’s important to understand the risks and gains in investing.
Final thought: Cut down on any unnecessary expense and where else you can save for now. Nothing beats the joy of owning a home that you have worked hard for.