Oct 04 2021

Tips to Save for Your Down Payment

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.
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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!

These days, more and more people are looking to buy their dream homes, especially as remote work and work-from-home setups have become an enduring trend. A 15 point increase in requests for home tours and other home-buying services, along with a 11% rise in Google searches for homes, indicate an uptick in demand to buy houses in the country. However, there is a definite worry about affordability when it comes to housing, especially as hefty price tags on available residences have kept the market just as competitive as before, if not more.

According to the latest reports from analysts, it’s not all bad for existing homebuyers and aspiring house hunters. As previous data shows, timing matters in the housing market, and working on different approaches to home buying – like through a reliable lender – can help advance you towards more affordable housing goals. Below, we discuss whether house hunters should buy now or wait, and why.

 

What is your financial situation?


Counter to the rise in home demand, there is a considerable lack of supply. Along with rising prices and interest rates, the housing market may seem like a highly competitive space with wealthy homeowners fighting for what little property is left. It can be overwhelming, but knowing where you stand financially can help you better strategize your home buying journey. Following the four key components of affordability, ask yourself:

  • How much do you have saved for a down payment?

  • How much does your household earn?

  • What debts do you carry?

  • What is your credit score?

 

Familiarizing yourself with these components will help inform your decision on whether or not to wait. For example, taking the time to improve your credit scores before committing can save you from higher interest rates in terms of your monthly mortgage payments. Alternatively, many young homebuyers are compromising by living with family for a significant amount time to save up for a down payment. Getting this out of the way when you’re able to can help you get better loans to buy sooner than later in case interest rates end up increasing.

What kind of home is best for you?

Buying a home is a huge purchase and a big commitment. With shifts to digital and remote ways of working taking place in recent years, this has provided homebuyers with opportunities to be more flexible when buying homes. Homes in areas away from busy cities and urban hubs, for example, are considerably cheaper. This makes them a perfect option for buyers who work from home, or aren’t required to be present in the office on a consistent basis.

The lifestyle you expect to live is as much a factor to consider as money. Condos and townhouses offer lower maintenance costs in the long run, and are perfect for smaller households when compared to single-family homes. If the household grows, homebuyers looking for a side income can even invest in renting out purchased properties to passively earn back what they spent and look into bigger properties for family use.

What does the future look like?


In a previous post, we talked about the rising mortgage and interest rates. While the market may seem bleak or intimidating in its current condition, housing experts also believe factors such as supply have a high chance of returning to pre-pandemic levels by the end of 2024. If you are financially able, buying now while others may be intimidated by the prices can give you an edge. Conversely, taking some time to get your finances in order can benefit you when it comes to securing better loans and lower interest rates.

Working with experts can help you make better decisions for the loans you need, making sure you don’t get trapped with high interest rates or hidden charges. The future of fintech suggests that big data is the future of loans, as more online lenders are now using algorithms, which predict potential defaults better than FICO scores do. Data is also leveraged precisely to identify customers who fit various products well — which can give you peace of mind, as an aspiring borrower. Here at City Lending for example, we find the right programs to fit your needs and profile, making sure you get some of the lowest down payments and interest rates along with a premium service.

And if you’re still unsure, it’s worth considering that waiting it out in the market’s current wild conditions could result in even higher interest rates in the future. At the end of the day, buying a house is ultimately a huge investment, which comes with benefits such as privacy and a financial investment that for the most part will weather most economic storms.

Find out if this is the right time for you to get a house by contacting one of our loan officers today.

 

Content intended only for the use of citylendinginc.com

Written by Alicia Christopher

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