First-time home buyers have to overcome the big hurdle of saving for a downpayment. This is such a huge task it can be challenging for several to figure out a way to even get started on the saving process. Let’s break it down so that you can reach small goals as you work towards the big accomplishment.
Tips For Saving For Your Downpayment
Determine How Much
You need to determine how much you are saving. What is your home price range what percentage of that are you working towards saving for? Putting down at least 20% will help you avoid paying for private mortgage insurance, however, you can get approved for a mortgage with smaller savings. If you have a great credit score and a lower debt-to-income ratio, you may find a lender that will allow you to put down less.
Accelerate Your Savings
Whatever you determine you want to save, the steps to getting there will be vital to your success. You want to automate your savings and keep them separate from all of your spending. This will help it be a seamless process and less painful for you as you adjust to spending less each month. In some cases, some employers offer direct savings accounts you can use. When you get this process going, then you need to be creative and save all of the spare cash that you find or that comes your way in the form of a bonus, tax refund, or gift. You can even use the cash back from credit card points and transfer it into your savings.
Don’t Use Your Savings
Keep your down payment savings separate from your emergency savings. Emergencies or unforeseen circumstances always happen so plan for these by having a separate savings account for these and your down payment. Create a fund for your downpayment as well as an emergency fund.
As you save for your downpayment, you can look into different forms of help available through a down payment assistance program. There are local and state first-time homebuyer programs that offer grants towards down payment assistance. There are also some available tax credits as well as help with closing costs. These assistance programs are through the US Department of Housing and Urban Development. Different requirements are depending on where you live and your income level.
Another way to get financial help for your downpayment is by receiving a gift. In some scenarios, you may have friends or relatives who may be willing to gift you money towards your downpayment. This has to be an outright gift and you will be required to document how you got the additional funds. There are specific rules for receiving a gift.
Whether you are a first-time home buyer or looking to invest in real estate, saving your money is a huge part of the financial process of purchasing a home. If you require a real estate expert, contact us. We would be happy to assist you with all of your Palm Desert real estate needs.