Use the following ideas to save for a down payment quickly and with minimal stress. In addition, to talking to a loan specialist can make home-buying stress free.
The majority of home loan options require buyers to make a down payment. The amount of the down payment that a lender requests depends upon factors such as the type of loan that a person applies for and whether they want to pay for private mortgage insurance (PMI).
The majority of home loan options require buyers to make a down payment. The amount of the down payment that a lender requests depends upon factors such as the type of loan that a person applies for and whether they want to pay for private mortgage insurance (PMI).
The generally accepted rule of thumb in the real estate business is that it is best to try to make a down payment of at least 20% of the purchase price of the home. People who choose to do so enjoy benefits such as being able to opt out of PMI and potentially having lower monthly payments.
Coming up with 20% is not always easy for many homebuyers today. Special government-backed loans for veterans are an option that can help you to avoid having to make a down payment. These loans also provide buyers with the ability to choose to make a down payment of an amount that fits their financial goals.
According to the National Association of Realtors, the median down payment for all home buyers was around 12% in 2019. First-time home buyers had a median down payment amount of 6%.
Using the following ideas makes it possible to meet your goals for a down payment quickly and with minimal stress.
Set Up Automatic Deposits to Your Savings Account
Many banks allow you to set up your accounts for automatic transfers. Look into the options that your bank offers. Some allow you to round up purchases so that the change from each one goes directly into your savings. There may also be an option to automatically deposit a larger amount on a specific day each month.
Plan a Staycation
That annual vacation can easily eat up several thousand dollars. Planning a staycation allows your family to still enjoy a memorable summer or holiday. The extra money that you save can then be used toward your down payment savings. Just think of it as an investment for buying a new house that feels like a vacation home.
Put Family Gifts Toward the Down Payment
Most lenders have a few rules about how you can use money gifts for a down payment. You may need to furnish a letter outlining the details of the financial gift. Certain loans also require that buyers pay a percentage of the down payment themselves.
Sell Off Property
Some people use the money from the sale of their primary home to put toward their down payment. This might be an option if your current house sells fast. Other forms of property such as an old vehicle, business building or outgrown home items can also be sold off to raise funds. A garage sale is a simple way to put a few extra dollars into your down payment savings and clear out the clutter for a move at the same time.
Get Lower Closing Costs
Homebuyers often set money aside to cover the closing costs on their new home. VA loans limit the amount that buyers can be charged for many of the closing fees. This savings opportunity helps you to budget more money to go toward the down payment.
Whether you want to put down the full 20% or take advantage of home loan options, saving money for a down payment does not have to slow down your buying process. In addition to talking to your loan specialist, make simple changes that all add up to a nice sum that you can put down on your new house.
