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Tips on Saving for a First-Time Home Down Payment

Whenever the subject of buying a first home comes up, the conversation often turns to current interest rates. To hear some people talk, all it takes is the right interest rate to make home buying happen. While that can be, and often is, true, there are plenty of people for whom interest rates aren’t the primary concern. In fact, many would love to get to the point of worrying about interest rates. It’s that pesky down payment that concerns them.
It’s recommended that homebuyers put down 20 percent or more in order to secure good financing. With the median home price in the U.S. averaging $320,000, that’s at least $64,000 homebuyers have to come up with before they even think about shopping for an interest rate. How can you put aside that kind of money? Well, unless you have direct access to cash in the form of a rich and generous relative, odds are you’re going to have to work at it.

There’s a Lot of Advice Out There

Fortunately, there’s a lot of good advice available. And not just other people’s opinions. For instance, the federal government via the Housing and Urban Development Department offers answers to frequently asked first-time homebuyer questions and even a guide to buying a home that takes first-timers through the entire home-buying process, step-by-step. You may even qualify for assistance through a program you don’t realize you qualify for. It’s also a good idea to get out there and take a look at not just federal resources but also at state-specific sources of information unique to where you live.

Understand How Much You Need

The one may be obvious, but it’s important. Learn about home prices where you want to live, do the 20 percent down-payment math and get a good look at the target number you need to save toward. Another obvious-but-important point: compare all that to just how much money you earn and how much you can reasonably expect yourself to generate. It’s also important to stay on top of news that may have an effect on house prices. For instance, elements of tax reform have spurred a lot of debate about what the plan could mean for the housing market overall.

Figure Out How Much You Have

Here’s one for you, don’t forget about the money you already have available. For instance, if you have a nest egg, such as a Roth IRA, you may decide to purchase your home is important enough to merit tapping into your long-term savings. And while you’re considering options, think about just what time of year is the best one for making that home investment.

Save Via the Magic of Technology

Electronic saving can be a useful method for first-time home buyers. If you never actually “touch” the money you’re putting aside, it can be easier to live without. Check with your employer about the possibility of having your electronically-transferred salary divide between two bank accounts. And then talk to your bank about setting up a dedicated account that can accept those deposits.

Put Good Fortune in the Bank

When some money comes your way in the form of a gift, a bonus, a raise, a prize, a tax return (which can seem like a prize!) or some other source, resist the temptation to splurge for the short term. Put that happy monetary arrival in the down-payment bank account mentioned above.

Don’t Be Lured by Shortcuts

Investing can be a great way to build up a cash stockpile for the long-term, but that money is vulnerable to market shifts. You don’t want to be in the position of relying on the current market value of a stock portfolio when it’s time to convert some investment assets into that down payment. Old-school saving methods like bank accounts or certificates of deposit don’t yield a mountain of interest, but they also don’t run the risk of making that down-payment you’re building disappear overnight.

What If 20 Percent Just Isn’t Going to Happen for You?

Don’t give up homeownership hope if it looks like getting to that 20 percent number isn’t a real possibility. There are options out there that can help you buy a home using a lower down payment. You might also consider not going it alone. Working with the right professionals is a good way to navigate the confusing waters of first-time home buying.
When you’re ready to talk insuring your new home, we’re here to help. Give us a call at 888-267-3282 or visit us at www.selectquoteautoandhome.com.
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