Saving For A Down Payment

Saving For A Down Payment

Let's see. You could win the lottery, kill off your rich uncle, or marry a millionaire. But there may be a better way!

Set a goal.

It's easier to start saving if you have a specific goal in mind. Sit down with your REALTOR® and discuss your budget and expectations. Be honest and realistic. You won't get a $500,000 home if your income is $35,000 a year. Decide how much you can afford to spend on monthly mortgage payments, and how much cash you'll need for your down payment and closing costs.

Then make your goal tangible! Cut out pictures of homes and put them on the fridge. Carry a picture of your dream home in your wallet. When you're tempted to splurge on something else, you'll have a reminder of your goal right in front of you.

Make a plan.

To reach your goal, you'll need discipline and determination. You'll also need a budget. Don't moan and groan, it won't be that bad. Get out a pencil and some paper, and make two columns: income and expenses. Now write down how much money comes in, and what it's spent on. It's a good idea to track all your expenses in detail for a month or two. You'll end up with a good idea of where your money is going, and where you might be able to cut back.

Part of your plan should include paying off credit cards and other debt. It would be a shame to have your down payment saved up, and then to be turned down for a mortgage because you're carrying too much debt.

Get some help.

There are lots of programs out there to assist first-time homebuyers. Your REALTOR® can help guide you to federal, state and local programs that may offer reduced down payments, low-interest down payment loans and other advantages. If you're lucky enough to have relatives who can help, remember that you can accept up to $10,000 each year as a gift without having to pay any taxes on it.

Use your investments.

This requires careful planning, and you may want to get some professional advice on the ins and outs of tapping into your investments. If you're thinking of cashing in some long-term investments, there may be there are fees, penalties or other charges involved; and you'll need to carefully consider the impact on your retirement years. It's tempting to take money out for a worthwhile goal like buying a house, but it's very hard to put that money back in.

You can do it!

You might have to tighten the old proverbial belt and give up life's little luxuries for a while, but it's well worth the sacrifice to get yourself into the housing market. Once you own your first home, you'll be on your way to building equity, increasing your net worth and enjoying the American dream.

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