Every year, millions of potential home buyers begin the process of saving for a down payment on their first or second home. According to real estate and banking surveys, only about half have success on the initial attempt. Is there a secret for success? Probably not, but there are methods that seem to guarantee success, according to experienced real estate professionals. Potential buyers have come up with countless ways for obtaining down payment funds for a home, but industry pros say that only a handful are truly effective. Here is a brief description of five approaches that have the power to get you from here to down payment without too much sacrifice or pain.
If you are looking to buy a home specifically for flipping it for a profit, you should also checkout experts like LEI Home Enhancements to increase the home's value through renovations. But back to our primary topic - ways to save for the initial downpayment...
Use the 10 Percent Rule
For decades, financial advisors have suggested saving 10 percent of all income in order to put away enough for purchasing a property. If you can realistically up that percentage to 12 or 15, then your goal will become reality even faster. Never underestimate the power of cutting expenses and putting cash away for a rainy day. In this case, though, your rainy day is a new residence.
Refinance Education Debt
If you have outstanding student loans, this is one area of your finances that you can positively impact. By having the option to refinance, you have three very important points to consider. First, you’ll have access to additional cash flow, as your new loan payments will be lower. Second, you’ll get a lower interest rate. Third, you’ll have longer to repay the loan, which means less financial stress in your life. As you approach the home-buying process, less stress is a good thing. Those lower payments mean more cash available to save for a down payment, as well as afford the monthly payments thereafter.
Reduce Living Expenses
Most working adults can find a bit of slack in their budgets. Surveys indicate that leaky budgets are actually pretty common. Look and see whether you can spend less on clothing, entertainment and fast food. Eating most meals at home can save the average consumer over $2,000 per year. Take the time to examine your expenses and adjust them accordingly. Also think about joining a shopping club to cut grocery expenses. The standard club can save shoppers even more by buying in bulk.
Skip Vacations
Put off vacations until you have the amount you need to get the deal done. Even if it takes you three years, your next trip will be all the sweeter. Becoming a homeowner involves sacrifice, but the rewards are worth it.
Get a Second Job
If you decide to take on a second job, enter the decision slowly. Think about just working an extra 10 hours per week and see if that can get you to your goal quickly enough. If not, ramp up your added hours to 15 per week. The point is that you don’t want to overdo the extra work time. Stress can lead to burnout and illness. Aim for just the right number of additional hours.
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