Saving for a Downpayment-- Tips to help!8/19/2016
When you rent a house or apartment, chances are you are helping someone else rather than yourself. If you rent a house, you're paying someone else's mortgage, and if you rent an apartment, you're probably just filling and investor's pockets with cash. Buying a home is a great way to spend money on your housing that actually builds equity. It's not only a home that you own, it's an investment - a great way to build future wealth. Not to mention owning your home is a point of pride.
Of course, even though you may want a home, you may feel that you simply can't afford to buy right now. You're definitely not alone. A recent survey by a personal banking firm reported that one in five Americans don't even have a savings account, and a significant portion of those that do have an account carry a very small balance in that account if any at all.
One of the hardest parts of affording a home is coming up with the down payment. In Pittsburgh coming up with 10% or 20% for a down payment may seem daunting, but it's not impossible. These steps proved helpful for past clients who thought they’d never be able to come up with a down payment.
- Set a target goal. Talk to a mortgage professional to find out how much home you can afford. That way, you'll know roughly how much you need to save for a down payment. Research shows that people who have specific dollar amounts in mind for a savings goal have a better success rate. If you need a referral to a trusted mortgage professional, please let me know. I work with several that I would happily recommend.
- Assess your spending habits. Don't just make a rough audit of your monthly rent, utilities, insurance, and grocery costs. Really look into your monthly bank and credit statements from the last three months to see where your money is going. That will help you really find out where you can start to cut back.
- Shrink your TV package. Cable bills are on the rise—and often come bundled with services you may not use! You can always - ALWAYS - call your local provider and try to negotiate a lower rate. If they have competition, use that as leverage. Also consider consolidating to only streaming services like Netflix, Hulu, and Sling TV.
- Drop the gym membership. This could be tough if you frequent the gym - but many of us don't. Think about what you can do outdoors, and research some of the endless home workouts available online.
- Unload your stuff. Utilize online sites such as Craigslist or eBay to help get rid of the items you no longer use. You may not be sitting on a fortune of stuff that people will pay for, but added to the other savings actions you take, this could make a significant difference.
- Downsize your apartment. Moving from a one-bedroom to a studio could save lots of money without sacrificing too much space. This can also help you purge some unnecessary belongings, which can also bring in some more cash. A smaller space can also create savings in heating and cooling bills. Every dollar counts!
- Get a side gig. You're probably thinking your 9 to 5 job is enough work, but think about opportunity cost. That hour you just spent watching reruns or surfing YouTube after work is $10 you could have made pouring coffee at the local coffee bar, driving for Uber, or doing freelance work for services like TaskRabbit or AgentAnything. A couple night shifts or even a single weekend shift at a part-time job could contribute thousands toward your future down payment.
- Open a high-yield savings account. If you're saving more or earning more with a new part-time gig, don't keep that money in your checking account where it's not accruing any interest. High-yield savings account offer daily access to money and accrue interest daily as well.
- Get a cash rewards credit card. If you pay your credit card bill on time and in full each month - Ditch the no-frills credit card for one with cash-back rewards. It's an easy way to earn extra.
- Save your tax refund. Depending on your work and how much tax you have taken out, saving your tax refund can yield a nice chunk each year. The key is to have it direct deposited into the bank account--- it won’t temp you to spend it on other nonessential items.
- Attend a Financial Seminar. Consider attending a seminar hosted by the financial pro's. Recently I attended a Dave Ramsey Seminar and it was very insightful as to how to overcome the financial challenges we face on a daily basis.
If you have more questions about how to save for a down payment, don't hesitate to ask me! I can help you find out how much home you can afford and what you need to do to reach your goal.
Get in touch with me TODAY and let’s put a plan in place to get you where you want to go!