One of the biggest obstacles for potential homeowners is saving for a down payment. That is why we put together a list of the 6 best ways to save for a down payment on your home.
1. Fixed Automatic Transfers
Using a fixed automatic transfer from your checking account to savings account is the perfect way to save for a down payment on autopilot. This solution is great for those that have extra money each month but tend to spend it before they have a chance to save it.
You can have your bank set this up for you, or even have your employer separate your paycheck direct deposit into 2 different accounts. You will need to pick a fixed amount that makes sense every month after all your expenses.
2. Reduce High Balance Credit Cards
High balance credit cards are the kryptonite of saving for a down payment. When your credit cards are maxed out, you are being charged a hefty interest payment every single month the balance remains. This is a steep price for borrowing money and can keep many Americans stuck in significant debt.
Getting rid of this interest payment can free up money that could be used for a down payment.
3. Lower Expenses
When is the last time you looked at your budget? Often, we have expenses that we can cut that would not make a huge impact to our day to day lives. This can include:
- Subscription boxes
- Gym Memberships
- Eating Out
- Online Shopping
The best thing to do is look at your budget and decide what you could cut until you get into your home.
4. Down Payment Assistance Programs
Depending on where you live, your financial situation and the company you use for a mortgage, there may be down payment assistance options available. While these often come with higher interest rates and refinance stipulations, it may be a great way to kick start your homeownership dreams.
5. Borrowing From Your 401K
While this should not be your first option, your 401K can serve as place to borrow the down payment funds from. This is a loan to yourself which if paid back in full, will be much less cost than from a bank.
However, it comes with a few drawbacks. You will not earn potential investment growth and if you leave your job before the loan is paid back, it is considered a withdrawal and will cost you in tax penalties.
6. Reduce Tax Withholding
Do you get a sizable tax refund every year? You may be able to reduce the amount your employer withholds for taxes every check and save it towards a house. Yet, make sure you research the potential impact changing the withholding will do. Withholding too little could cause you to have a bill come tax time.
Curious about how you can take advantage of one of these options, click here and schedule an appointment with a home loan expert. They can look at your current financial situation, develop a plan and get you on your way to becoming a homeowner today.