Considering buying a new home? It can be very fun and exciting to browse through listings of homes for sale and imagine one day living in your dream home. The biggest concern for many would-be home buyers is related to saving the funds needed for a down payment. It is often the largest roadblock on the path towards homeownership. Here are a few tips for clearing this obstacle and successfully purchasing a new home.
Tip #1: You may not need a large down payment.
First time and even repeat home buyers are often surprised to learn that many mortgage programs don’t require you to put a lot of money down. For example, with an FHA Loan you can buy a home with as little as 3.5% down. This is a huge savings when compared to the ten, twenty, or even twenty-five percent required by some mortgage programs. This smaller down payment amount can be saved much more quickly, meaning you could buy a home sooner than you may have thought possible.
Additional benefits of an FHA Loan include:
- Perfect credit is not needed to qualify.
- More flexible requirements, meaning more borrowers are eligible for financing.
Qualifying veterans and active-duty members of the US military may be able to buy a home with no down payment at all. VA Loans offer 100% financing for purchase mortgages. This makes it much easier to buy a new home – a wonderful benefit for our nation’s heroes who have served.
Wondering what you could be approved to borrow with a low or no money down home loan? Give us a call today!
Tip #2: Create a home buying budget.
Whether you are saving for a small down payment for an FHA Loan or determine a conventional loan or alternative program is a better fit, having a plan can help you reach your goal sooner. To make a budget that will allow you to increase your savings start by tracking all your spending for a month. Look at all your regular bills such as:
- Rent or existing mortgage and housing costs.
- Transportation expenses – car loan, auto insurance, gas, public transit.
- Utilities and cell phone.
- Debt payments – student loans, credit card balances, personal loans.
- Childcare or pet care.
- Alimony or child support payments.
- Medical insurance.
Then look at what you spend each month including everything you put on a credit card or pay cash for. Some of your spending categories might be:
- Groceries and dining out.
- Entertainment and shopping.
- Gifts and charitable giving.
- Travel.
Sort through the budget to find areas you could cut back on for the time needed to save for your down payment. Maybe you’ll reduce the number of times you eat out or get takeout each week. Maybe you could trade that morning visit to the coffee shop for brewing a cup at home, knowing it will get you into your new home that much faster.
Here are a few other ideas for non-necessities you might trim from your budget to help you save:
- Trade movies out for movie night at home. Make it fun by picking a theme and inviting friends.
- Cut back grocery spending. Challenge yourself to a “clean out the pantry week” which saves money and food waste – win win!
- Stop buying new clothes. Go to the back of your closet to rediscover items you may not have worn in a while. Have a special event that requires a fancy outfit or specific gear? See if you can borrow something from a friend or rent for less than buying new.
- Cancel an expensive membership to a gym or workout studio and get outside to run, walk, or bike ride. At home workouts are a great option also. Missing the camaraderie of your gym buddies? Ask a friend to join you!
Have you saved for your down payment and are ready to get pre-approved? Get started now.
Tip #3: Find big opportunities to save.
Saving $5 on a latte here and $15 on a yoga class there will add up more quickly than you might think, but if you’re hoping to buy a house soon you might want to fast track your savings. Evaluate your budget for some large savings you can cash in on to see that down payment fund really grow.
A few things to consider are:
- Skip the vacation this year. Opt for a staycation where you are a tourist in your own town. Bonus points for visiting free places such as parks and outdoor areas. You can also search for local discounts at attractions near you.
- Hold off on buying a large ticket item such as a new car or re-furnishing a room. Work to save up for the new home first.
- Rent is often one of the largest expenditures on the monthly budget. Could you save by adding a roommate for a period of time?
Tip #4. Stay motivated.
Create a visual reminder of your goal to help keep you on track. Print a photo representing your dream home and place it in a spot you’ll see every day, such as on your refrigerator, bathroom mirror, or desk. Regularly check in to see the progress you are making as further motivation to stick to your budget and keep saving for that new home.
With some hard work you could be holding the keys before you know it!
Do you have questions about what you need to save for a down payment? We are here to help – call to talk to one of our home loan experts!
