January 7th, 2015 8:11 AM by Jackie A. Graves
Down payments frustrate a lot of would-be homeowners. Coming
up with a large sum of cash can seem impossible, but it doesn’t have to be.
Setting up a savings plan now will help you get the down
payment you need and show lenders you’re a responsible borrower.
For Down Payments, Bigger Is Better
Sound financial planning can help you amass a large down payment, which has several
with small down payments can find themselves with mortgage balances much greater
than the value of their homes (because of interest).
Larger down payments can prevent this problem.
While low down payment loans are
available, lenders prefer to write loans with larger down payments.
The larger the down payment, the less risk for the lender.
increase your chances of getting a loan with a lower interest rate.
you put 20% or more down, your loan won’t require mortgage insurance or a second
mortgage to avoid mortgage insurance.
Make Saving a Habit
Saving for a down payment is tough, but there are some
strategies you can use to making saving money a habit—not a chore:
is important, because if you don’t know where your money goes, you won’t know
where you can cut back.
up a payroll deposit into your savings account or set up an automatic
checking-to-savings transfer on payday to make things easier.
certificates of deposit (CDs), money market funds and other low- to no-risk
savings or investment vehicles to help your savings accumulate faster.
Give Yourself a Boost
Saving for a down payment one paycheck at a time can be
frustrating. To help you get there faster, use some of these tricks:
back on nonessential spending. Do you really need to pay for Starbucks,
name-brand items or subscriptions to magazines and cable TV? There
could be many items you can eliminate from your budget, and the savings
would be substantial.
your credit card debt to save credit cards for emergencies only.
your tax withholding to make sure you’re not overpaying. It may feel good to
get a tax refund in the spring, but that really is a free loan to the
government. The money you get back is cash on which you could have been earning
interest. The IRS website has
a calculator to learn how much in taxes you should have withheld from your
expendable assets. Saving for a home may be just the reason you’ve been looking
for to unload stamp, coin, baseball card and comic book collections or other
items that are collecting dust in your closets, safe deposit box or storage
another job. If you are already squeezed, consider working retail during the
holidays, selling on eBay, taking on freelance work or finding some other
source of income solely for the purpose of saving for that down payment.
That’s right: Sell all that stuff you never use that won’t be a good fit for
your new home. Clear the clutter—an
organized home is a time-saving home, and time is money.
By: Craig Donofrio |Updated from an earlier version by Broderick
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