August 26th, 2013
Mortgage rates and home values are on the rise, and you want to take advantage of the ideal buyer’s market while you still can. The only problem is you don’t have enough money for a down payment.
In the Zillow blog post “5 Tips to Help You Save for a Down Payment,” Benjamin Feldman offers some guidelines for saving a big chuck of money to put down on your dream home.
Know how much you need. Down payments range from 3.5 percent to 20 percent. On a $400,000 home, that could be anywhere from $14,000 to $80,000. The first step is figuring out what your price range is, and what mortgage loan options you want to look into.
Use the home as motivation. Saving money is tough in general, but saving $20,000 can seem impossible. Feldman suggests making a visual reminder of why you’re saving and put it in a very visible place where you’ll see it every day:
You can take a picture of a house you want to buy (or even one from a magazine) and put it on a big piece of cardboard or poster board. Then write an inspiring message next to it such as “My future home!”
Positive reinforcement can go a long way, and stop you from spending extra money that you could otherwise save.
Identify and conquer your budget shortfall. It’s easy to run your credit card everyday for a $5 latte without thinking much about it, but it adds up to nearly $2,000 a year. Take a good look at your spending for the past two months and see which categories of spending can be reduced substantially.
Try earning extra cash on the side. Feldman suggests checking out sites such as Elance.com or oDesk.com that connect freelancers to people all over the world who are willing to pay for their services. For example, people are making money right now as virtual assistants, writers, designers and transcriber in their free time. Or, you could take the traditional route and look into bartending, waiting tables or babysitting.
Celebrate milestones. Setting small goals with help you keep your positive attitude up. Just don’t celebrate by going out for a pricey dinner.
Another tip Feldman doesn’t touch on:
Set aside money from every paycheck. Set up a bank account specifically for your down payment, and then modify your direct deposit (if that’s what you use) to put $50 or $100 from each paycheck directly into that account. Do the same when you get your taxes back. You’ll be very surprised how quickly the money adds up.