You’re ready to buy your first house, but coming up with a down payment may feel overwhelming. To help you get started, talk to a mortgage consultant about your down- payments options. Most lenders offer options between 3.5% and 20% of the sale price. Once you have an estimate of how much you’ll need, divide it into a manageable monthly savings goal. Open a dedicated savings account for your down-payment money.
Try these strategies to accelerate your savings and reach your goal.
1. Reduce large expenses.
Rent is most likely your largest expense, so when your lease is about to expire consider moving to a less expensive place or finding a roommate. Refinance your car loan. If you have student loans, talk to the lender about repayments options based on your income. Consider transferring credit card balances to a lower interest rate card.
2. Find affordable alternatives.
Reevaluate your monthly services – TV, cell phone, Internet, and gym – and find more cost-effective options. For example, if you cancel your satellite TV service and sign up for Netflix and Hulu, you could save over $1,000 a year.*
3. Receive a cash gift from family.
Talk to your lender about cash gifts – the amount of gift money you use for a down payment can affect the type of loan you can get. Plus, the lender may require the giver to provide proof that the money is a gift, not a loan.
4. Borrow from your retirement account.
As a first-time homebuyer, you can withdraw up to $10,000 from your retirement account and avoid the early withdrawal fee. Additionally, you might be able to borrow cash from your 401(k); you’ll have to pay it back.** Just remember, once you use retirement funds, they’re no longer available and earning interest. Please consult a financial planner and tax professional before you use retirement funds.
5. Pick up a part-time job.
If you can, find a part-time job that you can do on the weekend or in the evening. You’ll be surprised how quickly a few hours a week can add up. For example, if you work 8 hours for $10/hour, you’ll make $4,160/year before taxes.
6. Set up automatic savings.
This is a simple, yet effective strategy. Ask your payroll department to allocate a percentage of your paycheck to your dedicated savings account. Don’t forget, if you receive a bonus or salary increase, add these funds into the account.
Saving for a down payment may be challenging but with some time and dedication, it’s attainable. To learn more about the down-payment options at Orange County’s Credit Union, please call (800) 506-5070.
*Based on pricing for DirecTV’s most popular package with two receivers found on DirecTV’s Web site on November 24, 2105.
**Please consult your 401(k) plan administrator for the more details.