You’re ready to buy a home. You have a great job, good credit and you’re prepped for the responsibility of homeownership. But what about the down payment? Coming up with enough money for a down payment can be one of the toughest parts of buying a home. Here are some ways to make it a bit easier:
Meet with a mortgage lender. While most conventional mortgages require a down payment of 20 percent of the home’s purchase price, there are many federal and state lending programs that can help you have a down payment as little as 3.5 percent – or even less! Meeting with a mortgage lender can help you figure out how much home you may be able to afford based on your income and debt load and how much you’ll need to save for a down payment.
Open a dedicated savings account. Consider keeping your down payment money in a separate account. Why? You may be less tempted to dip into an account dedicated to buying your next home. And you’ll be able to more easily track your progress. You may also want to set up automatic deposits to this account from your paycheck. That way you won’t forget to keep feeding that account.
Think twice about raiding your retirement accounts. If you’re thinking of taking money out of a retirement account, or borrowing from it, to buy a home, consult a financial planner and/or accountant who can help you determine any penalties and taxes you may incur. Most financial professionals do not recommend withdrawing funds from retirement accounts to purchase a home, but in some instances it may make sense.
Find new ways to save. Review your budget and see if there are areas you can trim. Cutting back on deluxe cable TV packages, pricey cell phone plans, restaurant meals and trips to Starbucks can yield some significant savings over time. Have a family meeting to discuss your homeownership goals and ask your spouse and children to help come up with ways to save. On the flip side, having garage sales and selling items you don’t use could help free up some cash to add to your down payment account.