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    How to Save a Down Payment for a Home in 12 Months

    There comes a time in many people’s lives when the idea of buying a home goes from “someday” to “someday soon.” However, one of the major hurdles first-time homebuyers face is coming up with a down payment. According to Zillow1, the median home price in the U.S. is $226,800, so a 20% down payment equates to just over $45,000! While saving that much money in a year may seem like an impossible feat, there are options to help you achieve your goal of homeownership. Here are a few ideas to help you get your down-payment account funded within 12 months:

    Consider different loan types

    For starters, not all loans require 20% down. In fact, some loan programs even have zero down payment options!

    Federal Housing Administration (FHA) loans typically only require a 3.5% down payment. FHA loans include a number of other attractive qualities for borrowers—particularly first-time home buyers.

    Veterans Administration (VA) loans , available to eligible military& members and veterans, have much smaller down payment requirements, sometimes even allowing borrowers to buy with zero down payment!

    Check for state and local government assistance

    Another option to help you achieve your goal of homeownership is to look into down payment assistance programs. Some state and local governments offer down payment assistance to qualified homebuyers, especially first-time buyers. It would be well worth your time to conduct an online search or speak with a knowledgeable mortgage loan officer to find out what options are available for you.

    Get down to business

    Once you've determined the best loan program for your financial situation and whether you qualify for any assistance from your state or local government, you'll know what you're up against for a savings goal. There are essentially two ways to accumulate funds toward any goal: earning or saving.

    Earn extra cash whenever possible

    Assuming you already have a full-time job, here are a few ways to earn extra cash, all of which should be saved toward your down payment:

    • Take on a “side hustle.” Side hustles are all the rage these days since websites and mobile apps have given people access to side jobs that suit their abilities, interests, and schedules. With apps like Uber, Favor, InstaCart, Handy, and DogVacay, to name a few, you can essentially take complete control of how much extra cash you earn.

    • Sell or rent items you aren't using. For example, if you have a spare room in your current home, rent it out. If you have items that you don't need, have a garage sale or list them for sale on Craigslist, OfferUp, or ebay.

    Cut Expenses

    To reach any aggressive savings goal, you can also trim your expenses in every way possible. Track your current spending, set up a monthly budget, and identify areas that can be cut in order to increase your monthly savings. There are a number of apps available that can help you find spare cash to tuck away. Remember, since your goal is to save for a down payment, every penny of these savings must go toward that fund. Here are some ways to find new savings:

    • Cut non-essential expenses. For example, replace your gym membership with walks or running outdoors, cook meals and snacks instead of ordering take out for lunch, invite friends over for drinks instead of going to a bar, and make coffee at home instead of driving through your local coffee shop. You can also look into free entertainment in your local neighborhood instead of going to a movie.

    • Evaluate your living expenses. Move to a cheaper apartment, move in with friends or family, or live with roommates to trim your household expenses substantially. Reduce your energy usage to save on utility bills.

    • Avoid buying anything new that isn’t completely necessary. For example, if your car, cell phone, and computer meet your current needs, resist the impulse to upgrade and pocket what you would have spent.

    • Trim your transportation costs. If you have an expensive car, especially if it still requires a hefty loan payment, look into selling it and buying a cheaper used car. Talk to friends and coworkers to see if anybody would want to carpool to work, or check if public transportation would reduce commuting costs.

    • Shop around for insurance, cell phone, cable, and internet providers to see if you can realize some cost savings, or cancel some services entirely.

    • Save every raise, bonus, gift, tax return, and extra money you receive, including little payments like credit card reward checks.

    • Make discretionary purchases, such as groceries and gas, with cash when possible and practical. Studies show that people spend less when paying with cash as opposed to credit or debit cards.

    Put your funds out of easy reach

    If you only have a year to save up for your down payment, you probably don't have enough time to put your money in stocks or anything else that includes any risk. Your best option is likely an online savings account or a savings account with a credit union, which can often offer a slightly better interest rate than a regular bank. In addition, avoid acquiring an ATM card with your savings account so that you cannot remove money quickly or easily. In other words, make it difficult to sabotage your savings.

    Related reading: What to Expect When Closing on Your New Home

    Just like any large goal, saving for your down payment can seem daunting at first. Fortunately, above all, it's a matter of patience and discipline. Furthermore, the good budgeting and money management habits you build during this time will serve you well when you become a homeowner with new expenses. Use these tips, stick to your plan, and remember that your end goal will be worth the temporary sacrifices. Good luck with your house hunt!

    Fina a Pro

    1. https://www.businessinsider.com/cost-to-buy-a-house-in-every-state-ranked-2018-8

    Marcia Messer

    Marcia Messer is a Loan Officer with SWBC Mortgage. She works tirelessly to help her clients achieve their goal of home ownership and is committed to making the experience positive and memorable. NMLS #: 222428

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