The biggest hurdle for many first-time homebuyers is being able to save enough money for a down payment. There’s a misconception that you will need a pile of cash before purchasing a home. Potential homebuyers are often deterred from starting their journey to homeownership because of this barrier. Once homebuyers start the purchasing process, many are surprised at how little down payment they actually need.
1. Calculate what you can afford
Before you even being to look at homes, the first step is deciding what you want in a home, and how much you can actually afford. List your basic requirements including location, size, and other features that are important. You should calculate what your monthly payment would be plus any fees, taxes, utilities, maintenance, etc. That way, you will know exactly what you need to save, what you will be paying, and there will be no surprises down the road.
2. Set up a savings plan early in the game
Creating a savings plan may be tedious and can take some discipline, but it is a guaranteed way to reach your savings goal. Set a specific deadline to accomplish something and stick to it. Start early and with baby steps. If your goal is to save $10,000 within two years, divide that by 24 months, and then divide that by 30 days. That’s only $14 a day. In four years, you’ll have $20,000. That’s a 20% down payment on a $100,000 home.
3. Don’t buy things you can get for free
This may seem like a cheapskate way to save money, but taking free condiments, napkins, and other freebies from restaurants can really add up. Think about the condiments you buy weekly. Ketchup, mustard, mayonnaise, salt, pepper, and vinegar on average cost between $2-3 dollars on your biweekly grocery trip. Taking these for free will save you about $18 every week or two, $36 per month, and $432 per year.
4. VA Loans - For Those Who Serve
Veterans and current military service members might qualify for a range of benefits. One of the most intriguing of these is the VA Loan program. This program gives you the opportunity to purchase a primary residence with minimal down payment or no down payment at all if you qualify. (Thanks for serving our country!)
5. FHA Loan Low Down Payment
The Federal Housing Administration (FHA) type of loan is great for any first time home-buyer, but it is superb for customers who are worried about being able to afford a high percentage down payment. With this loan, you can put as little as 3.5% down. The FHA Loan has helped many people purchase a home with little initial investment. This is a great program that lends a helping hand to those in need of assistant when becoming a homeowner.
Overcoming the hurdle of affording a down payment is no easy feat, but if you eliminate unnecessary expenses and choose a program that is the right fit for you, you could find yourself on the track to purchasing your first home. If you have any questions about recommended down payments or need other tips on how to save money, please feel free to contact a mortgage advisor today. When you have your savings in order, get a free rate quote using our multi-step calculator.