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How to save for a down payment

Michelle McQuade | May 18, 2018

When preparing your finances to buy a home, having a good credit score can make you feel confident about your chances of securing a favorable mortgage. But what about coming up with the down payment? Usually 20% of the purchase price, the down payment is often the biggest hurdle that first-time homebuyers face.

piggy bank

If you’re not quite there yet savings-wise, try these effective strategies to boost your funds (or you can find a loan product with a minimal down payment requirement):

  • Pay off your credit card debt

    One way to start setting aside more cash for your down payment is to actually use your cash – use it to reduce your high-interest credit card debt, that is. Pay down/off outstanding balances to clear accumulating interest charges. This will allow you to stash more of your inbound income into your down payment fund.

  • Put your vacations on hold

    Buying a home is a huge commitment, so some sacrifices need to be made. This includes travel. Staying put means spending less, while also giving you extra time and energy to put into moneymaking activities.

  • Find ways to earn a little extra

    Your salarydoesn’t have to be your only source of income. If you’re too busy to moonlight, consider selling unused or rarely used items from your home.

    Consider selling some of your investments, as well. After all, you’ll soon gain a new vehicle for a long-term investment using those returns – your house.

  • Tap into your retirement fund

    First-time home buyers are allowed to withdraw up to $10,000 from their Individual Retirement Accounts (IRA) with no tax penalties. This benefit gives young couples a considerable advantage, allowing them to put a combined total of $20,000 into their down payment for a first house.

  • Look for loan programs that require a minimal down payment

    Government agencies can help you secure a home loan with very little to zero down payment requirements. National down payment assistance providers include:

    • Federal Housing Administration
      The FHA requires only 3.5% minimum down payment, making it an ideal option for buyers with poor credit histories.
    • Fannie Mae or Freddie Mac
      These government entities provide support to local lending institutions so they can offer competitive interest rates to borrowers and accept down payments as low as 3%.
    • Your local or state government
      The Ohio Housing Finance Agency (OHFA) has quite a few loan options, particularly for first-time homebuyers. One of these is Your Choice! Down Payment Assistance, which lets homebuyers pay just 2.5% or 5% of the purchase price. Just note that there are going to be income and purchase price limits for this and other similar programs, so you’ll have to check if you and the homes you’re interested in are eligible.

Want more useful home buying tips? Browse our regularly updated blog. As top Realtors in Cleveland, Chagrin Falls, and their surrounding communities, Michelle and the rest of the team have plenty of insights and experiences to share.

For the latest updates about Cleveland, Ohio homes for sale, give us a call at (440) 823 2448 or email michellemcquade(at)howardhanna(dotted)com today.

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