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a Down Payment on a Home
Creative Ways to Save For A Down Payment
Conventional
mortgages typically require borrowers to put down
5%-20% of the loan value. Although this may not sound
like a lot, when it comes to purchasing higher-value
homes or if you're a first time buyer, finding ways
to come up with the cash can be daunting.
Experts advise borrowers to set a reasonable time
frame and be realistic when it comes to determining
a savings plan. While the traditional ways to acquire
down
payment funds are good options (high-yield savings
account, low money down loan programs), there are
other ways to save that you may have overlooked.
Start Living Below Your Means
By reducing your monthly expenses, you will have more
cash to put into your home savings plan. Join a coupon
group and create budget-friendly meal plans. If you're
home during the day, try to only use natural light
to reduce electricity costs. There are lots of ways
to tone down your lifestyle while saving money. It
just takes discipline.
Put Your Talents To Work
Do you have a special talent or trade skill that you
could use to make money? Maybe you're really good
at photography or fixing computers. Do you like to
write? Consider doing some freelance work. Are you
a painter or sculptor? Try selling some of your creations.
Be Realistic
Take a realistic look at the home you want to purchase.
Is it really within your means? If not, there's no
point in cutting back on everything and moonlighting
5 nights a week. Instead, lower your expectations
a little and look into some other properties.
401K or Other Retirement Plans
While most retirement plans penalize you for early
withdrawals, if the money is going toward a down payment
on a home, many plans will allow it with no penalties.
Check with your financial adviser for details.
Ask For A Raise
The old saying goes, "whatever you are, be a
good one." Even if you hold a menial position,
always try to go above and beyond. This will show
your boss that you are a valuable worker who they
want to keep around. After you've proven yourself
to the company, schedule a meeting with your boss
to discuss your future with the company.
Get A Roommate
While this may not be the best option for everyone,
consider A) renting out an unused room in your home
to a responsible adult or B) moving in with parents
or other relatives. Whichever you consider, make sure
there are clearly established rules and a well-defined
time frame. For example, if you think you can save
up enough money for a down payment in less than a
year, tell your roommate(s) that you can only do a
10 month lease. If you plan on moving back in with
Mom and Dad, negotiate an acceptable time frame for
everyone involved.
While saving for a down payment can take time and
discipline, it is your first lesson in the responsibility
of owning a home. Talk to your real estate agent or
mortgage lender for more information on creating a
financial plan for your home. There are also home
financing solutions for qualifying borrowers such
as USDA
mortgages, FHA
loans, and VA
mortgages which may have lower down payment requirements.
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