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5 Simple Ways to Save for Your Down Payment

Owning a home is the dream and goal for so many of us. Being one of the largest financial decisions one will make in their lifetime, getting there can feel daunting and overwhelming at times. Unfortunately, one of the largest contributors in deterring people from achieving this dream is coming up with thousands of dollars down payment. The good news, there are many ways to overcome this hurdle with traditional and non-traditional ways to raise cash for your down payment.

A down payment is the money paid in cash while purchasing a home. For example, a typical home purchase will require homebuyers pay a down payment equal to 3-20% of the total value of the home, and a bank or other financial institution covers the remainder of the costs through a mortgage loan.

So what if you don’t have thousands of dollars just lying around for this down payment? Are you out of luck and stuck renting for the rest of your life? Lucky for you that’s not the case because we have 5 simple ways to get money for your down payment!

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1) Shrink your required down payment by choosing the right lender and financing option

There are many programs for homebuyers struggling to save for a down payment, especially for first-time homebuyers. Selecting a qualified and credible lender can make all the difference. These banks or financial institutions will inform you of your ability to access aid from Fannie Mae and Freddie Mac, and government sponsored loans which can be as low as 0-3% down payments. Some of these options are FHA, VA, and Rural Development loans. Various banks, credit unions, non-profit and community groups may also offer little to no down payment options, such as a Conventional 97 loan (97% financed loan), and it is a good idea to check your local availability.

2) Downsize Your Lifestyle

How much can you save towards your down payment by eating out fewer times weekly, or spending less time shopping online? How much cash could you make by selling things that are cluttering up your lifestyle? Think about parting ways with items such as old clothes, DVD’s, old sporting or exercise equipment, memorabilia, even kitchen items and wall art. Maybe have a garage sale to really help purge unnecessary items. This will not only help you make and save money towards your down payment, but it will also help you declutter and you’ll have less to pack when you move into your new home!

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3) Gain Control of your Budget and Finances

There is the obvious recommendation here to pay off your credit card debt because the interest rate alone is holding you back! But also think about having a written budget and sticking to it. When every dollar has a purpose, finding ways to save more money becomes much easier. Try setting up a dedicated account for your down payment savings and pledge to put every tax refund, gift of cash, purchase refunds, and work bonus into it. Or put your savings on “auto-pilot” with automatic transfers of a certain percentage of each paycheck. When in doubt, speak with your accountant or banker to help you come up with efficient ways to take control of where your money is going.

4) Ask for a Raise, and use it wisely!

Many companies offer annual pay increases, and won’t give you a dime more… unless you simply ask! When was the last time you asked for a raise? Does your performance merit an increase? No matter how you get it, make sure you use the increased cash in a smart way. Remember the dedicated savings account? Take every increase you earn and put it directly into that account. You won’t even notice the difference in your lifestyle and at the same time will be building for the future.

5) Use your Investments

There are many resources and studies showing that an investment in a home can be much more effective than an investment in your company 401k, or even an IRA. There are also some tax laws that may allow you to use money from your IRA funds as a down payment if you’ve never owned a house. It is essential that you speak with your financial advisor or CPA before using this option, as you will want to be sure to reduce the tax implications as much as possible.

Sincerely,

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