If you are planning to purchase a home in 2014, it is a good idea to start saving for a down payment.
The Lawhead Team would like to share an article from Coldwell Banker that talks about 5 helpful tips to saving for a down payment.
Read entire article at Coldwell Banker’s website to find out how to save for your down payment.
1. Decide How Much House You Can Afford
The first step is to set your savings goal. Research home prices and determine how much you can afford. Calculators can be found on most bank websites and on the FHA site at www.fha.gov.
As of Feb 2013, the median price of existing homes in the U.S. is $173,600, according to the National Association of Realtors. A 5 percent down payment for a home that price would be $8,680. A 20 percent down payment would be $34,720. If you’re able to save 20 percent, lenders will not require you to purchase Private Mortgage Insurance, which will reduce your monthly expenses.
2. Set Up a Savings Plan
You’ll also need to create a savings plan and set a deadline for reaching your goal. One method is to find the difference between your current housing costs and your projected monthly mortgage payment, and put that much away each month.
This system has the advantage of allowing you to decide if you really earn enough to afford the home you want. “In some cases, if a homeowner is paying a low rent, doubling that payment can be quite a shock, even if the bank says, ‘You meet our guidelines,’” said Mike Hines, homeownership services director for the Sacramento, Calif., office of the NeighborWorks America.
Open a separate savings account for your down payment to minimize the temptation to tap the money for other needs. Also setting up automatic transfers to your new account will lessen the chance you’ll spend the money elsewhere.
Review your spending habits and determine where you can find extra cash. If you’re determined to buy a house as soon as possible, try living like a tightwad. Start by putting away the credit cards. Then cut out cable TV, switch to a less expensive cell phone plan and reexamine other aspects of your spending until you’ve pared back to just necessities. Use coupons at the grocery store and stay away from the mall. Hold a garage sale or sell unused items online. There are dozens of books and blogs you can turn to for frugal living advice that can help accelerate your savings.
Read two more tips to saving for a down payment from Coldwell Banker.