A down payment can seem like a big obstacle toward owning a home – it doesn’t have to be.
While saving for your down payment takes time, here are some ideas that may help you reach your goal of homeownership sooner.
Before you start to shop for a home it’s important to know how much you can afford. Online home loan calculators can give you an idea of your monthly payments, but you might also want to talk to a mortgage loan officer who can guide you through additional costs such as sales tax in your area and closing costs. Once you know the amount you’ll need, you can start saving.
Review your monthly budget for places where you can trim your costs. For example, are you always eating out? Or buying a premium coffee (or maybe two) every day? Once you’ve committed to saving for your down payment, it’ll be a little easier to trim those extra costs.
You wouldn’t start a diet program expecting to lose 20 pounds overnight. Saving for your down payment is the same way – it takes time and planning. Break down your savings goal into manageable amounts and set a timeline so that you can track your progress.
For a home purchase, you can borrow against your 401(k). In other words, you can borrow money from your retirement savings and put it toward your home purchase. As you repay the loan, you’ll be putting money back into your own pocket – not the lender. The typical repayment period on these loans is 5 years.
It may be easier for you to set aside money for a down payment if it’s not part of your regular savings or checking accounts. Consider opening a savings account just for money that will go towards your home purchase. It’ll be easier for you to see your money grow – and to avoid taking it out – if you have a dedicated home savings account.
Many lenders, including KeyBank, have first-time homebuyer programs available with lower down payment requirements. Beyond these programs, a mortgage loan officer will be able to answer your questions about mortgages and down payments.