The New Year is less than a week away. You may still be recovering from the last month of celebrations, and you may have plans for one more big night on New Year’s Eve, but it’s time to think about 2019. Is this the year you get serious about buying your first home? Then let’s get right to your first goal: Saving for a down payment. If you plan to make saving for a down payment your New Year’s Resolution, here are six suggestions, and a starting bonus to put you on the right path.
First Things First. Get your financial ducks in a row. How? Meet with a mortgage loan originator (from First Choice Loan Services Inc., of course!) who understands the needs of first-time homebuyers. You’ll get the facts on credit scores, down payments and loan programs. You’ll learn what documents you’ll need for your loan, and get a clear understanding of the loan process from the time you submit your application to the day you close and get your keys. You’ll also find out what you may need to work on to qualify for your home loan, such as improving your credit scores or paying down debt.
Set A Budget. Now that you understand what’s involved in obtaining a home loan, you can set a realistic budget for your home purchase. You don’t want to start looking at homes only to find out you can’t afford your favorite. Also, remember there’s more to homeownership than a monthly principal and interest payment. You’ll have property taxes and insurance (usually escrowed as part of your mortgage payment), routine maintenance, and expenses like replacing a roof or furnace.
Special Account. Start saving by setting up a special account for your down payment – and nothing else. Think of it as a deposit-only account, not a piggy bank you can raid when you need some extra cash. Look for the best interest rate to help your money grow. Since you know you won’t need the funds in the short-term, consider a certificate of deposit that will make you commit to a certain term during which you can’t access your money without paying a penalty. Be sure to check all the options – credit unions, national and local banks – and compare rates and programs.
Make It Automatic. You can’t spend what you don’t have. Take temptation away by setting up an automatic deposit from every paycheck into your down payment account. Make it a large enough amount that you feel like you’re making progress, but not so much that it affects your basic needs. You may feel the pinch at first. When you do, remember your goal – a home of your own.
Small Ways To Save. Little savings can add up. Where can you save money? You’ve already thought of the coffee drinks, but what about the afternoon soda or iced tea? Bring your drinks from home. Extend the time between haircuts, or even – gasp – forego the highlights and lowlights. A regular night out with friends can be a major monthly expense, so have a night in instead. You may not be the only one who wants to save money, but you may be the first one brave enough to break the routine. Go for it, you trendsetter! (Don’t forget to put the money you save into your down payment account.)
Windfalls And Family Gifts. Tax refund. Raise. Inheritance. Bonus. If you are fortunate enough to receive some extra funds, put them right into your down payment account. Does your family support your goal of homeownership? Maybe they’ll be willing to help with your down payment, but be sure to discuss this with your loan originator to make sure you document any gifts(s) correctly.
A Side Hustle. Can you take on a second, part-time job to help fund your down payment? You may have a skill or interest in something people need that you haven’t thought of as a moneymaker. Ask everyone you know and look online (beware of scams). As a bonus, you’ll be so busy you may not notice that you didn’t go to the movies this week.
Need a boost? Create a visual. Combine photos of your dream home (kitchen, bathroom) with a monthly savings update and post it where you’ll see it every day. You’re on your way!