Ways to Save for Your Down Payment

With today’s home and real estate prices inching ever higher, coming up with the typical 20% down payment is harder than ever. But the dream of owning a home is still within reach for first time home buyers if they are willing to apply the effort and make the sacrifices.

First, take a look at options to a conventional mortgage such as FHA loans. These loans allow borrowers to put down as little as 3% and finance the remainder. Other loan programs to consider include VA loans - if you are eligible - as well as a variety of government assistance programs for first time home buyers. Ask your Phoenix real estate agent or mortgage lender about government assistance programs for eligible borrowers.

Next determine just how much cash you need to come up with and get busy finding the money. Below are a few places to look in your search for money.

Your 401K or Other Retirement Savings Plan.

When withdrawing money for a down payment of a home, many plans won’t penalize you. Check with your tax advisor about the consequences of using retirement funds.

Your Tax Refund Windfall.

If you get a hefty tax refund each year, put it in an interest bearing account and save it for your down payment. Depending on your timeframe, you might consider putting the savings into a CD where you’ll earn a guaranteed return on your money. Talk to your employer about having more tax withheld from your weekly salary. This is a good way to accumulate a larger tax refund.

Your Parents.

Many young adults are living with their parents for longer stints and pocketing the savings for their down payment. If this option is available, consider paying a modest rent and pitching in with household expenses. You’ll still be ahead over living on your own. Be sure to aggressively save the difference. In addition, your parents may give you a non-secured loan or even "gift" you enough for a real estate down payment.

Sell Excess Belongings.

It is true that one man’s junk is another man’s treasure and today’s marketplace makes selling unwanted items easier than ever. You’d be surprised what you can sell on eBay or having a garage sale. It all adds up.

Lighten-Up On Your Lifestyle.

Make a few changes to your lifestyle and pocket the savings. Pack a lunch each day instead of eating out and you’ll see the savings add up. For example, if you’re spending $5 per day on lunch, you’ll save $20 a week. That’s over $1000 in a year. Other changes include reducing your cable TV to the basic package, renting DVDs instead of going to the theatre, quitting smoking, giving up your expensive coffee fix, reduce nightlife spending and start living under your means.

Automated Savings. Out of Sight, Out of Mind.

Once you’ve begun living underneath your means, you should have extra money to put into your savings account. One of the best ways to ensure you don’t spend it is by setting up an automatic transfer from your paycheck directly to your savings account. Many payroll departments can accommodate such a request. If not, set up automatic transfers from your checking account instead.

Ask For A Raise.

When was the last time you got a raise? Have a chat with your boss listing all of your accomplishments that have positively affected the company’s bottom line and ask for a raise. Contribute a better job effort. Volunteer for extra responsibilities. In addition, consider working overtime or taking a second job to accelerate your savings.

Do You Have Freelance Talents?

Do you have an artistic flair or a special talent? Find a way to put your talents to work. Sell your artwork, start writing freelance, tutor students, sing at special events, mow lawns on the weekends, find a way to do what you love and make money at the same time.

Use The Experience of Your Realtor.

When you are close to your goals, work with your realtor. Your realtor can help you negotiate with sellers and obtain creative financing. They may be able to get the seller to kick in cash towards the down payment in return for a full price offer.

Consult With Your Lender.

Your lender can help you find financing options and “piggyback” loans to cover the cost of the down payment.

Lower Your Expectations.

Consider scaling back on your expectations of your dream home and search for a home at the lower end of your price range. The lower the price, the lower your down payment will be.

As you work towards your goal of saving for your home down payment, remember to pay bills on time and work on improving your credit score to improve the chance of securing a real estate loan with the lowest interest rate possible.

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