5 Ways to Save for a Down Payment
Investing in real estate is not just something for the wealthy. Even with a small down payment anyone can get involved in the real estate game and be on the road to achieving the American dream.
First things first. You will need to determine how much you will need for a down payment before you even create a plan. If you plan on purchasing an investment property that you won’t be living in, plan on at least 20%. Should you be purchasing something that you are going to reside in, you can get away with much lower provided that you have good credit. This can even be as little as 3.5%. Just note that if you do put less than 20% down, you will be required to pay private mortgage insurance or “PMI.”
Here are some helpful strategies to follow as you create your savings plan.
Step 1: Create a Budget
The very first step is to identify how much you will need. See the above mentioned percentage requirements for which applies to you. Consulting with a mortgage broker early on is also a great idea as they can provide you with the latest rates and loan programs as well as get you prequalified based on your credit score.
Step 2: Cut Your Expenses
Take a look at your bank statement and monthly expenses. You may be shocked to see how many things that you pay for regularly that you could cut. Can you trim down your cable TV bill to a lower package? Do you have to have satellite radio in your car? Trimming these expenses can really add up into sizable savings each month and over time.
Step 3: Sell Unnecessary Items
After you have trimmed your expenses, now take a look at the things you physically have and decide if you need them. How many things are simply wants versus needs? You just might have some jewelry, watches, electronics or appliances around your home now that you could sell for extra cash towards your down payment.
Step 4: Save Bonus Money
Anytime you receive extra money that you hadn’t planned on, put it aside in your savings. This includes things like tax returns, work bonuses, holiday checks from family or friends or the like.
Step 5: Extra Work
This is easier for some than others. Do you have the opportunity at work to take on some overtime? Do you have enough free time for a part time job? Could you even partake in a paid study? All of these ideas can also help you reach your financial goal.
In the end, just remain patient. Buying a home is a big commitment and you will certainly want to be financially stable when you make the plunge.