The road to home ownership is exciting. There are new neighborhoods to explore and new homes to tour. With the cost to rent on the rise across the nation, coupled with low interest rates and friendly lenders, the time is right for many first-time buyers to own a new condo, new townhome, or new single-family home. Before you hold the keys to your new castle, you’ll need to establish how much you can afford to spend on a mortgage (use this helpful tool), and how much you’ll need for a down payment. Down payments are typically as low as 5 percent. On the higher end of the spectrum, some homebuyers invest up to 20 percent of the total home cost in order to avoid the mortgage insurance costs. As such, a new home priced at $350,000 would typically be purchased with a down payment ranging from $12,250 to $70,000. (For specific calculations related to your budget, check out this down payment calculator.)
Coming up with a large sum on the spot isn’t easy for most people, which is why planning and saving is essential to success. How can you do it without breaking the bank? Surge Homes presents five easy no-hassle ways to save for a Houston home down payment.
No. 1: Establish the Basics
The first rule of saving is planning. Establish a budget, end-goal date for purchasing your new home, and the amount you want to put down. For example, if you want to purchase a new condo priced at $200,000 in one year from now, and you want to put 10% down, then establish July 2016 as your end date and $20,000 as your end goal. Keep a digital spreadsheet or paper trail so you can track your progress. (Read more about the budgeting basics here.)
No.2: Open a Separate Savings Account
Experts recommend setting up a separate savings account so you can be sure that the funds you’re saving will be dedicated to the down payment for your new home. With a specific savings account, you won’t run the risk of using the money for anything else, and you can easily check to see your savings progress.
No. 3: Dedicate Extras to the Cause
Put your tax refund and employment bonuses into your down payment savings account. If you receive any extra funds (refunds, pay outs, etc.), immediately deposit them into the account as well. This “extra” money adds up quickly toward your new home down payment.
No. 4: Request Gifts
For birthdays, holidays, celebrations, and special events, ask family members to donate gift funds. Nearly one-fourth of first-time home buyers use gifted funds to supplement or cover a down payment for a new home. While there isn’t a minimum or maximum amount someone can donate, the giver must be a legitimate family member in order to qualify.
No 5: Pull from Your Paycheck
Select an amount to be taken out of each paycheck and dedicate it to your new home down payment. According to this article from Zillow, most people can reduce their take-home pay by 2 percent and not notice any significant impact. Many banks allow you to set up automatic online deductions from a checking account to a savings account.
Saving for a new home down payment means being fiscally smart. Watch your everyday spend and keep your eyes on the prize. Be diligent, and before you know it, you’ll have the money you need for a down payment—and a new home to call your very own.
One thing is sure: no one builds their own wealth by renting someone’s’ else’s real estate.
