The first thing you want to do when saving for a down payment is to establish how much money you will need. If you talk to your parents or grandparents, they will tell you that you need to have 20% of the purchase price as a down payment on a home. That is because when they bought their house, you needed 20% down. It’s a fine goal to put 20% down, but also a very unrealistic one for most people. A first time buyer in Delaware County buying a home averaging $180,000, faces a down payment of 20% or $36,000. Most people just don’t have that kind of money.
My typical first time buyer puts between 3% and 5% down. A good loan officer should present you with several loan options with low down payment requirements. VA loans still allow for100% financing. FHA allows for a 3.5% down payment. So now that you are aware of a few low down payment options, how do you come up with that money?
Save – open a separate savings account and identify it for one purpose only – house fund. This might involve foregoing a vacation or sacrificing in other areas of your life. However, watching the balance grow will motivate you to keep at it. If you can systematically put in a pre-determined amount (ie. $100 per paycheck) you will likely not miss the money at all.
Work Overtime – a few extra hours a month can add up fast.
Sell Something – I once had a customer sell his motorcycle to raise some cash for a home purchase. He wasn’t really riding it much and he sold it for $5000.
Gifts – approximately 20% of my first time buyers get a cash gift from a relative. Often, your relatives don’t want to see you renting forever. They know that investing in a home is a good thing for your financial future.
Grant Programs– talk to your realtor, check out government websites, etc. Just be careful to do your research. There are many legitimate grant programs, but there are a few scams out there as well .
Employer Programs – check with your HR department. Some large employers offer financial assistance for housing. Read program details as there are often restrictions regarding where you can buy.
Income Tax Refund – don’t blow that money on a cruise, buy a house instead.
Talk to your realtor and loan officer about your housing goals and dreams. Together you can come up with a plan. It’s a great time to buy a home !
Next Topic – Loan options.
Steve Madonna
Weichert Financial Services
(610)- 566-2045
NMLS # 140438
