Whether you are a first-time homebuyer or a current homeowner, purchasing a home is an exciting experience. However, when the mortgage lender mentions the term “down payment,” potential homebuyers get nervous.
Saving for a down payment can be one of the biggest challenges homebuyers encounter. And with mortgage loans requiring anywhere from a 3-20% down payment, buying a home may seem impossible.
While saving money will take a little time, there are many ways and other tips to save money for a down payment, potentially helping you reach your goal sooner than anticipated.
Here are some tips to help you reach your goal savings for a down payment.
#1 Determine How Much to Save for a Down Payment
Knowing which mortgage loan you qualify for is beneficial to help determine how much of a down payment you need.
Many banks have conventional loans, such as non-conforming, fixed-rate, and adjustable-rate, that require a down payment as low as 3%.
Government-backed loans such as FHA allow as low as a 3.5% down payment, while VA and USDA loans require no down payment.
Meeting with a mortgage lender to determine what loans you qualify for, how much of a home you can afford, and how much of a down payment you will need will help you determine how much you need to save for a down payment.
#2 Cut Back Spending in other areas
While it may be nice to dine out or grab a luxury coffee and donut, cutting back on these things can quickly help save money for a down payment.
Simple things such as saving spare change or setting up automatic transfers from your checking to your savings account are beneficial.
Downsizing your lifestyle, such as getting rid of luxury items like Hulu, and Netflix, or trading your gym membership for free at-home workouts on YouTube, are other tips for cutting back on spending.
#3 Get Creative with Your Income
Consider spending a few hours on the weekends or after your day job having a side gig to help increase your income.
Dog walking, waiting tables, becoming a tutor, cleaning homes, and selling handmade crafts online are ideas to help save for a down payment. Freelancing opportunities have significantly increased over the years, making it easy to earn extra cash.
#4 Limit Credit Card Usage
For many consumers, credit cards are one of the easiest ways to fall into debt.
Try to live within a reasonable budget and have an emergency fund, so credit cards are rarely needed.
If you must use a credit card, choose the cash rewards credit cards, where you can at least get cash back or another type of incentive.
#5 Reevaluate Current Bills
If you are making unnecessarily high payments, it could be beneficial to shop around and see if you can find lower rates without giving up the things you enjoy.
Bills, such as a gym membership, the highest cable/internet package, or grocery bills, are a few examples of bills that you can re-evaluate and potentially reduce to help with monthly spending.
#6 Sell Your Belongings
It is easy to accumulate household items and other things when living in a home or rental. Have a yard sale or post your items on online platforms like Facebook Marketplace or eBay. You can sell many things, such as clothes, furniture, jewelry, toys, board games, and more.
#7 Ask for a Gift from Family
While it may not be ideal, asking family or friends for gift money for a down payment is not uncommon. Those willing and able to gift money can get a tax write-off from it in return.
#8 Save Your Bonuses and Pay Raises
Do you get yearly bonuses and/or pay raises at work? Or maybe it is time to ask for a pay raise. Whatever your job situation is, this is the perfect opportunity to dedicate any extra money earned at work toward your down payment.
#9 First-Time Homebuyer Programs
If you are a first-time homebuyer, there are many programs for those struggling to save for a down payment. First-time homebuyer programs are there to help homebuyers achieve their goal of buying a home by assisting with the down payment or offering a lower down payment option.
Some of these programs include Fannie Mae, Freddie Mac, VA loans, USDA loans, and FHA loans.
Marimark Mortgage is based in Tampa, Florida, and serves the mortgage needs of homebuyers, homeowners, and investors in Florida, Virginia, and Pennsylvania.
We specialize in mortgages for first-time homebuyers, conventional home mortgages, refinance loans, reverse mortgages, and FHA, VA, and USDA mortgage options. In addition, we’ve worked extensively with cash-out refinancing and help clients to lower their monthly mortgage payments.
To get started with a mortgage to buy your next home, please fill out our Quick Mortgage Application or contact us.