How to Save for a Downpayment
Congratulations! You’ve decided that a Bryan-College Station home purchase is in your future. Unless you are a veteran or have an incredibly high credit score, the chances of scoring a no money down loan are pretty much gone. In fact, most lenders are beginning to shy away from that option completely in order to avoid future housing market problems like we have seen in the recent past. You will need a nice chunk of change for your downpayment (most experts recommend 20% to avoid PMI and show yourself as a worthy candidate for the loan with lenders), closing costs, home inspection and other other miscellaneous fees. You know you can afford the house payment, but how do you save for the downpayment? Here are a few ideas I hope you’ll find helpful.
Set a Timeline - The first step to planning for your downpayment is to set up a timeline. When do you need the downpayment and how much do you need to save? This will help you determine how aggressively you need to save to get into your Bryan-College Station home. Determining your price range will also help you know how much you need to save. For example, if you’re looking at spending around $200,000 for a home, you will need to save between $20,000 (10% of the home price) and $40,000 (20%of the home price).
Separate Your Accounts – Keep your downpayment savings account separate from your checking and other banking accounts. This will help you avoid the temptation of dipping into the account to spend it on other things. If you find it too hard to avoid temptation at your own bank, set up a completely new savings account at a different bank altogether.
Automatic Paycheck Withdrawals – Check with your employer to see if they have automatic deposit (most employers offer this). If they do, have a portion of your check diverted to your downpayment savings fund automatically every paycheck. You won’t miss what you never saw to begin with. You’ll be amazed how quickly funds will add up before you even know it.
Increase Your IRA Contributions – Most lenders allow you to withdraw up to $10,000 from your traditional IRA if you are a first time homebuyer in Bryan-College Station or anywhere across the country. So, make the most of your IRA contributions now.
Budget – Now is the time to sit down and go over all your household expenses. This includes your current mortgage/rent payment, car payments, credit card payments, groceries, entertainment, dining, etc. expenses. Look at where you can cut your spending. Make your coffee at home before your daily commute or drink the free stuff at work instead of spending $5 on that morning latte. Bring a sack lunch. Eat out just once a week instead of three. Make movie night a night in by renting instead of spending big bucks at the theater. When you get closer to your savings goal, think about paying down as much of your outstanding debt as possible (car loans and credit cards). This will help decrease your debt-to-income ratio, making you a much more desirable candidate for a Bryan-College Station home loan.
These are a few ways you can save for a downpayment on your Bryan-College Station home. Follow these guidelines and you’ll be a homeowner in no time. Let me know how I can help you live the good life in Bryan-College Station real estate.