Tips for Accumulating a Down Payment

 

• Save – Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.  Practice

 

• Make your payments starting today – My mom taught me this strategy years ago.  Start making your new mortgage payment today.  Once you qualify the difference between your rent and your furture mortgage payment, start saving in a special home account.  This wil do two things.  One, you will be saving more for your down payment and two, you will get a feeling for what it is like to make the mortgage payment today.  Try it, it really works.

 

• Move – You may be able to save additional funds if you can move into less expensive housing.

  

• Reduce other higher interest rate debt – Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.

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• Make a deal with the seller – In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.​

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• Gift from Family – Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.

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• Borrow the down payment from your retirement plan – As a last result this is an option.  Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.