First-time home buyers commonly worry about the down payment that is required when financing a home. Down payments can range from 3% to 20% of a home loan depending on the buyer circumstances, loan package, price of the home, etc. For some, a down payment is no big deal. However, most first time home buyers will need to save up to put money down.
Saving up funds to cover a down payment often feels like an impossible task. In order to make this project more manageable, choose a target down payment amount (for example, 3% of a 350,000 home loan is $10,500). Next, enact a game plan with monthly goals that you’d like to reach. Be sure you’re reading through your plan every day to stay motivated.
Here are some creative ways to save up money for a down-payment:
1. Gift funds: Some loans will allow for gift funds from family members, friends, employers, and even non-profit groups. Ask for cash towards your down-payment instead of birthday or Christmas gifts. Mostly, get the word out there because family and friends might be excited to donate!
2. Sell Some Stuff: Old computer in storage? Extra couch? Video games? If you don’t need it, sell it. One man’s junk is another man’s treasure. Use Ebay, OfferUp, Facebook or your local Craigslist to get rid of clutter fast. Put the money you raise into a savings account and forget about – at least, until you begin the home buying process.
3. Jump Online: Nowadays, full-time workers are picking up extra cash through online jobs. Got a talent for logo design, transcribing audio, or handling customer complaints? Check out websites like Fiverr.com or Freelancer.com and pick-up a side job (or three). Again, take that money and put it in the savings where it’ll be safe and secure until you’re ready to purchase your home!
4. Start a Diet: A money diet, that is. This can be a little time consuming (and painful) but the idea is to cut all the “fat” from your spending – then take that money you were spending and (yes, you guessed it) put it in savings. You especially want to rethink automatic payments that are deducted from your bank account for monthly subscriptions. They can really add up!
5. File Your Taxes: It goes without saying that you should file your taxes anyway. However, if it’s close to tax season and you know you’ll be getting a refund, file and wait. 83% of Americans get over $2000 back in tax refunds according to money.cnn.com. That’s a good amount to put towards a down-payment.
Bonus tip: Track your spending - By tracking how much you spend each month and setting a budget, you’ll begin to notice where your “frivolous” spending happens. Whether you reduce how often you eat out each month or take your cable bill from $200 to $150, you’ll see the difference almost immediately.
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