Most first-time buyers have the same question when they first start considering taking the real estate plunge: how are we going to come up with the down payment?
While there are more and more mortgages available with smaller down payment requirements, many Americans hope to put a sizeable amount down in order to make their monthly payments smaller. Yet most people don’t find it so easy to come up with tens of thousands of dollars, nor do they have a rich, generous uncle.
While many people realize they can save here and there by skipping the Starbucks and forfeiting designer duds, there are bigger, more tangible ways you can save, quickly adding up to the down payment for your little piece of paradise. Here are four of them:
1) Get Paid Less
Okay, not really less—you’ll still be earning the same amount—but if you can set up a payroll deduction plan with your employer, you can have a set amount taken out of each paycheck and placed into a savings account. You probably won’t miss the 2-5%, but it will start adding up with no effort on your part.
2) Automatically Save
Similarly, you can set up a recurring, automatic savings plan with your bank, which will repeatedly take money from your checking account and place it into savings. Rather than trying hard to be disciplined, your bank does the work for you.
3) Deposit Without Temptation
If you’re really concerned about the temptation of tapping into your savings, invest in a short-term CD. There are usually penalties for withdrawing early, so you’re than much less apt to withdraw the money before the term is up. You can choose the right term length for you, and earn interest in the process.
4) Make Big Changes
The home of your dreams and your future happiness are worth some sacrifices, aren’t they? If you’re currently renting an apartment, you’re throwing away money (especially here in the pricey Boston area!) that could go toward your down payment. Consider moving in with parents, roommates, or an understanding friend for a short period of time. Think about this: if you’re paying $2,000 a month in rent, you could have $6,000 saved in only three months if you’re willing to crash in your parents’ basement.
Saving money isn’t easy, but it’s far from impossible, and with these tangible approaches you’ll be well on your way to a mortgage you can afford and a home you can call your own.
If you’re buying or selling a home in the Boston area and are in need of a mortgage, or have any mortgage-related questions, contact me at any time for advice or help.