Raising a Down Payment for Your Home
In today's home mortgage market, a down payment may be a necessity. Here are some ways to raise a down payment for your home.
The days of little or no money down home mortgages have for the most part passed. Lenders are now requiring down payments and have raised their requirements for down payments.
No matter what the housing market is doing, it's also a good idea to strive for a down payment of at least 5 percent of the purchase price of your home. A down payment of 20 percent of your home's purchase price is ideal, because you may be able to avoid private mortgage insurance, or PMI, and also because a down payment of that size may reduce the chances of ending up owing more than your home is worth.
Here are some ways to get up a down payment and make the most of your down payment savings:
Pay yourself first.
Often, we treat savings as an afterthought or an "extra" after paying all of the bills. Make savings a "bill" that's just as important as the others. Another way to pay yourself first is to take advantage of an automatic deduction from your paycheck, if your employer offers this option, or automatically deduct a certain amount from your checking account. If you don't see it, you don't miss it.
Get creative.
Think of both conventional and creative ways to save money. Some options are:
· Putting raises, bonuses, tax refunds, or other unexpected windfalls into savings.
· Saving customer rebates.
· Rounding up purchases to the nearest dollar and saving the difference; for example, counting a $9.49 purchase as a $10 purchase in your checkbook.
Clean up credit card debt with a bill consolidation loan.
A bill consolidation loan may allow you to free up extra cash to save for a down payment. Visit our Debt Consolidation page to find out more about debt consolidation.
Borrow smart.
When borrowing money, look at which options may save you money. For example, a personal loan may offer you a lower interest rate than a credit card for a special purchase or unexpected expense. Also, look into credit cards that offer you a lower interest rate than you have now, or that offer cash back rewards.
Make the most of your savings.
Look for savings accounts or certificates of deposit that offer the best interest rate. Your savings should be a bit harder to access, like a certificate of deposit, to avoid temptation to use them if it's not absolutely necessary.
Turn trash and treasure into cash.
A garage or yard sale may help you turn unwanted household items into extra cash toward a down payment. You may also have some valuable assets that you don't take advantage of regularly that you could also sell.
Look into special programs for help.
Depending on your situation, you may be eligible for special programs to help you with a down payment. Ask your lender about these programs.
Protect yourself.
Some options to save may offer you a higher return, but that also means more risk. Avoid anything that seems too good to be true or that promises a lot in a short time.
These are general recommendations not applicable to all financial situations. Every financial situation is unique. Further, the suggestions and recommendations contained within the content provided are not an assurance of any future result. Be sure to discuss your specific financial circumstances with a legal or financial expert. Contact us for more information.
