Your Question: How Can I Save for a Down Payment?
Professor Tate's Answer:
Okay, so one thing that may make buying a home seem out of reach is coming up with the money for a down payment. Typically, you’re required to put at least 20% down to get a mortgage loan. Let’s face it, 20% is a lot. If you’re going to buy a $200,000 home, that means you’ll need at least $40,000 to purchase it. And that’s a chunk of change a lot of us don’t have just sitting around. So how can you come up with the cash? Here are a few helpful suggestions!
Number one thing to do is to cut back on your living expenses. Makes sense, right? If you eat out a lot, then eat out less often and start cooking at home more. Have you noticed how expensive the movie theater is?? Rent more movies instead of going to the theater. Just think.. if all you did was save $5 a week, that’s $260 a year that you’ll save. That adds up! Cut out $10 a week and double it! Think of unnecessary things that may be eating up your pocketbook (even without you realizing it) and eliminating them. If you’re in an area where you can get along without a vehicle, sell it! You’ll save on insurance, licensing, and get some money to add to your savings from what you made off of the sale.
Second thing to do is to save your money. Regularly put some money into a separate bank account or a CD that you will NOT tap into until it’s time for a down payment. You can even have a certain amount automatically withdrawn from your paycheck each week and put right into your savings account.
Check into federal or state assistance programs. HUD (The United States Department of Housing and Urban Development) offers programs with no down payment necessary. Check out their site to learn more. They can also set you up with a counselor who will give you advice on paying off your debt and save for a down payment.
Don’t use your credit card!! Stop using your credit card to make purchases, pay with cash. In fact, remove your credit cards from your wallet so that the option won’t even be there when it’s time to pay.
Move in with your parents and save hundreds of dollars a month in rent. If you don’t want to move in with mom and dad, see if you can room with a friend or other relative. Even if you split the rent with another person, it will be saving you a nice chunk each month.
Each penny you save adds up! So start clipping coupons! (Ever see “Extreme Couponing?? Ok you don’t have to be that extreme, but it sure would help, wouldn’t it? ïÂÂÂÅ ) Especially when you can double up on coupons, you’ll be saving money each time you go to do your regular grocery shopping.
If you can swing it, take on an extra job to build up some savings for the down payment. And, have a garage sale and sell things you don’t need. You could sell on sites online too.
The government allows you to receive up to a certain amount of money from a single donor tax free each year. So if you have friends or family that will be willing to gift you some money, it’s literally free money for your down payment.
Alright, now that you know what to do…. START SAVING!
You asked, now you know!
-Professor Reel S. Tate