How to Save a Down Payment for Your Dream Home

 

Are you having trouble saving for a down payment?

Do you dream of putting 20% down on your dream home?

An article recently published by CNN Money stated that student loan debt has caused an 8% decline in home purchases for those Americans that are ages 20-39 years old. The average graduate under the age of 30 owes $21,000 in student debt alone. That is a total of 1.1 trillion dollars in total outstanding student loan debt.

Here is the kicker. According to that same article, Is Student Loan Debt Hurting the Housing Recovery?,

“For every $250 a month in student loan debt that a household owes, it reduces their power to purchase a home by $44,000. And, he notes, that there are nearly 6 million households that pay more than $250 a month on their student loans.”

With student loan debts weighing future home buyers down, many are finding the American Dream hard to achieve.

In another article, CNN Money reported mortgage rates had fallen below 4%. This makes right now a perfect time to purchase a home. The problem is how can a first time homeowner save for a down payment so that they can qualify for such a low interest rate?

3 Ways to Save For Your Down Payment

  1. Don’t Sweat the Small Stuff
    The Washington Post reported that by simply skipping that daily coffee run, you will find yourself saving around $1,000 a year. If you brown bag your lunch instead of eating out, that’s another $2,600 a year. By only making two small changes, you will be $3,600 closer to your down payment and dream home.
  2. Instead of Retirement Savings
    An article by the Daily Finance recommends that, for a time, instead of contributing to your 401k you could put the money in a savings account to help save for a down payment. Another suggestion was the first-home exemption. The first-home exemption allows individual to use up to $10,000 of their IRA funds towards the purchase of a first home. That is without a 10% early withdrawal penalty. If you are married, you and your spouse can pull $20,000 without penalty. 
  3. The B Word
    A budget is telling your money where to go instead of wondering where it went”. - John Maxwell.

    While you may see the word budget as the B word, by creating one you can start telling your money where you want it to go, including a savings account of your down payment.

A Final Tip

Recently, we published an article about how much you actually need for a down payment. We all know that 20% down is ideal, but maybe there is another way. Please visit How Much Money Do You Really Need for a Down Payment?

Summary

Saving for a down payment for your dream home can be difficult, but with the above tips you should find it easier. If you are ready to start searching for a home, please visit How To Start Your Search For Your Dream Home.  When you are ready to start, please give our office a call.

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