Saving For a Down Payment on a Home
With the current state of the economy, banks have become more and more stringent on who they loan money to. Only a few years ago you would have been able to qualify for a mortgage for an amount that was beyond what you could possibly afford. These mortgages usually required little to no money as a down payment, and borrowers could also qualify for no asset, no income mortgages that allowed them to purchase homes that they could realistically not afford.
Due to the failure of some of the world’s largest banks, gone are the days of banks approving loans for mortgages that the numbers showed the borrower could not afford. Banks now require borrowers to have a near excellent credit score as well as a hefty down payment in order to qualify. You also need to prove your ability to make the monthly payments by providing copies of pay stubs and any other forms of income that would make you appear as a better risk to the lender. While buying your first home may seem like it is out of reach, here are some simple tips for saving money for your down payment so you can finally own the home of your dreams.
First, setup an automatic savings plan. No matter how badly you want to own your own home, the thought of trying to save money can be quite difficult, especially when your budget may be tight. One of the easiest ways to start saving money is to open up a savings account geared specifically to paying for your home. You can start with as little as $20 a week if that is all you can afford. This account should not be used for monthly bills or any other unforeseen expenses that may crop up. This automatic savings plan should serve only one purpose and that should be to help you buy your first home. Think of it as a set it and forget it account. Setup the automatic withdrawal once and just forget about the account. Over time you will have a tidy sum of money that will help you pay the down payment on your first home.
Second, create a budget and stick to it. Unless you have one already, you will need a budget in order to determine exactly where all your money is going on a monthly basis. The only way this can be accomplished is by writing out a detailed analysis of all your expenses. Write down all your mandatory expenses, like electric, groceries, insurance etc, and then include all the luxuries that you spend money on monthly. Total them all up and compare them to how much you make in a month. If your expenses are more than your salary then you need to consider pruning off some of your luxury expenses. You will need to eliminate at least enough charges to make both numbers equal, with enough leftover to cover the savings deposits. If you still can’t find enough money, then you may need to re-analyze your mandatory expenses. Things we often consider mandatory can really be done without, like cable TV, magazine subscriptions, and even pizza night. You may find that you can possibly live without some of these, for at least a little while.
Lastly, consider picking up a second job. If you have tried to budget your money and you still can’t seem to find the extra cash you need in order to save for a down payment, then you may need to consider taking on a part time job. Whether you work in retail, or you join the ranks of those offering their services on one of the many freelance sites on the web, taking on a second job can sometimes generate the extra cash you need in order to achieve your goals. Whether you choose to work only on the weekends, or you dedicate all your free time to your second job, your dedication will pay off in the form of extra cash for you and your new home.
These are just a few tips to help you save money for a down payment on a home. Create an automatic savings plan, and consider taking on a second job if needed, and you will be on your way to building the money needed for the down payment on the home of your dreams.
This entry was posted on Wednesday, October 28th, 2009 at 9:33 am and is filed under Saving Money. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
