Tips For Getting Your Down Payment Faster!
Typically, a first-time home buyer needs to have between 5-50% of the purchase price of your home as a down payment. If you are a first-time home buyer and wondering how to come up with the down payment, here are some tips to save your down payment faster.
Save Your Tax Refunds
Saving your tax refunds for a few years adds up to a considerable amount towards a down payment, especially if both you and your spouse commit to contributing the full amount.
Set Up A Savings Plan
A savings plan is a great way to make a regular contribution to your down payment fund. Some banks offer savings accounts that allow you to round up all your purchases and automatically deposit them into your savings account. This can be an easy way to save your down payment faster.
Sell Unnecessary Items
Selling everything that is not necessary can add a considerable amount to your down payment fund, and is also a great way to get rid of stuff before your move. You can always buy more stuff after you get your new home.
Check Out Government Programs
Depending on the area you plan to live in, there are a number of government programs available, especially for first-time home buyers.
Set Up a Money Market Account
Have deposits into a money market account automatically taken from your paychecks before you ever see them. That way, you won’t miss the money so much. Just set it up and forget it. If you don’t trust yourself not to withdraw the money, set up a joint account and have it be the kind where both people have to be present to withdraw money from the account.
Stop Paying Extra on Monthly Debt Payments
If you’re diligent about paying off debt and tend to make extra payments, you may want to consider scaling back and put that extra money toward your down payment instead. Don’t use credit to buy anything while you are saving your down payment and just make the minimum payment required on your current debt. There is a good chance you will have a lot of your debt paid down or eliminated by the time you have saved your down payment.
Consolidate and Refinance Your Student or Other Government Loans
If you hold federal student loans, consider consolidating and changing the repayment terms. For example, choosing the extended repayment plan for federal loans can reduce monthly payments by extending your term to 25 years. Take the savings from the monthly payment and funnel it into your down payment account.
Borrow From Your Retirement Plan
Although taking money out of your retirement plan can be a bad idea in the long term, certain retirement plans have built-in benefits to this. You can also borrow up to half of your vested amount from a 401(k). First-time home buyers can withdraw up to $10,000 from IRA accounts without penalty This is a big advantage, because typically, you are subject to a penalty of ten percent on anything you withdraw prior to retirement age. Traditional IRA account holders are still required to pay taxes on the amount of their withdraw. With Roth IRAs, withdrawn funds are without penalty, but the taxes can be more complicated. Check with a tax professional before going this route.
Trim Your Budget
Go over your budget with a fine-toothed comb and start chipping away wherever you can. Finding ways to save within your budget is a matter of how fast you want to save a down payment. You must be willing to stop eating out except for special occasions, vow to take no vacations and make any big expenses until after you are in your new home? It’s not just about trimming expenses, it’s also about finding ways to save on necessities like insurance rates, energy costs and food.
Take a Drastic Measure
Try living without a car or going from two cars to one. It’s radical, but it can save thousands of dollars a year by cutting out car payments, insurance, gas, repairs and taxes. If you own a gas guzzler, trade it in on a fuel efficient model and make sure it has a good warranty so you don’t get stuck with repairs for a couple years.