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8 Tips to Save for Your Downpayment
Dated: December 28 2019
8 Tips to Save for Your Down Payment
As a first-time homebuyer the first and most important step to buy a home is saving up enough money for your down payment. Your down payment affects not only the price you can pay for a home, but also affects your monthly payments.
While it may initially seem impossible to come up with such a large amount of money, saving up for your down payment is a simple combination of spending less, pocketing more and flexing your creative muscles. In this article, I break down 8 simple tips that you can use to start today.
#1 Set Your Savings Goal
First establish a savings goal. The average home in Jacksonville is $190,000, and down payments can be as little as 3% of the purchase price. That means you’ll need to save at least $5,700. Also, keep in mind the ‘hidden costs’ that come with buying a home including lender fees, fees to close the transaction, home inspection fees, insurance, etc. These costs vary, but typically start at 3%, which means you may have to save up at least $11,400 to get into your first home.
#2 Pay Yourself First
With your savings goal set, the next important step is to take 10% of everything you earn from this day forward and immediately set it aside into a savings account. If you get paid by direct deposit, ask your banker to set up these payments automatically. If your employer issues a check, take it to the bank and tell the teller to deposit 10% of it into the savings account and the rest into your main checking account. The key is to make sure as soon as you get paid, you pocket money away for yourself. That way, by depositing let’s say $400 a month automatically, you bring yourself $4,800 closer to your savings goal in just one year.
#3 Set a Budget
Since you are now limiting your income, it is imperative to set a budget. Invest the time to sit down and add up all your monthly expenses. Be honest with yourself and capture everything: credit card payments, app subscriptions, memberships, everything. Take it a step further and anticipate future expenses that you know will be coming up, such as car expenses, school fees, or medical visits. On the road to saving up for a home, surprises are not fun and can derail your budget. The good news is, most of these surprises can be planned for ahead of time.
#4 Cut the Dead Weight
Hopefully, by this time you are noticing a few costly patterns in your spending. Perhaps it’s Starbucks coffee every day, the nail salon every month, or premium car washes every week. At this stage in the process, identify what you truly need to live (rent, utilities, food, gas) … and cut as much as you can on everything else. Skip your $4.00 Starbucks specialty drink every day and pocket an additional $1,440 in a year! Opt out of your $30 a month gym membership ($360 a year) and hit the pavement with family and friends. Get your haircuts at the local beauty college for free, instead of paying $25 a week at the salon ($1,200 a year). Cutting these ‘little luxuries’ accelerates your progress to your savings goal.
#5 Give Yourself an Allowance
On the road to saving up for a down payment, turn back the clock and give yourself an allowance, just like the one you had when you were a kid. Based on your budget, identify how much money you can spend each week, and carry only that amount with you. Challenge yourself! Leave the credit cards at home. Staple your debit card deep to your wallet with a note that says EMERGENCIES ONLY. Label how each bill can be spent and use it only for those purposes. Giving yourself an allowance helps to physically keep you on the path to achieve your goals.
#6 Earn Some Side Cash
Get to your goal even faster, by making extra cash. If you can, take on more shifts at work; hold a yard sale; use apps like LetGo and Offerup to sell old items you no longer need or use. Do you have a special talent for baking, teaching yoga, or working with kids? Find creative ways to make money with it. When you’re saving up for a down payment, having those additional streams of income provides you that additional boost to reach your goals.
#7 Find Someone to Give You Money
Research the down payment assistant programs available. There are many organizations and non-profits that offer money to first time homebuyers to help them pay for their down payment and closing costs. The city, the county, and the state all have programs that provide either grants or second loans that can be used for the home buying process. Each one is different and has certain standards that must be met, so have your lender check your eligibility.
#8 Get a Coach
Purchasing a home is like running a marathon, and you are the runner. It takes time, lots of preparation and practice. You will feel defeated at times, experience setbacks, and get frustrated, which makes it critical to your success to have a coach in your corner. A coach will keep you focused, energized and spirited along the way. If you are looking for that coach to help you give me a call, it’s why I’m here.
Cindy Lee 904-803-3141
If you are looking for a real estate professional who is passionate about her work, experienced, continues to improve her real estate knowledge and skills, and is highly respected by her peers in the ....