If you’re hoping to buy a home but fear you will never come up with the needed down payment, take heart.
Many programs do not require large down payments as long as they are convinced that you can repay the mortgage on your current salary. For instance, the FHA offers a 3 ½ percent down payment program and the Veteran’s Administration (VA) has zero down programs in place.
With the value of homeownership so deeply entrenched in the American psyche, it’s hard to imagine that modern mortgages did not become a “thing” until 1934. In an effort to pull the country out of the Great Depression, the Federal Housing Administration (FHA) began to offer loans to people who had no way of paying cash for their homes. At that time a buyer was required to provide a 50 percent down payment and the mortgage was spread out over three to five years. At the end of the mortgage period a balloon payment was due. It will come as no surprise that only four out of 10 households owned their own home, at least until lending became a little less Draconian.
During your parent’s and grandparent’s time a homebuyer was expected to provide at least 20 percent down. As property values began to rise and homes moved from “a roof over their heads” to potential investment vehicles, it became difficult to keep up with home inflation enough to come up with that dreaded 20 percent. And while it’s been years since financial institutions actually required 20 percent down, the number has stuck in the minds of many a potential homebuyer.
In addition, many cities, counties and states offer down payment assistance programs and grants to help renters become homeowners. Finding out which programs are available in your area is as easy as asking your Seacoast Bank mortgage loan officer.
In the meantime, you will need money to make your homeownership dream come true. If, like many people, you’re living paycheck to paycheck and believe there is no way to put money aside, you may be surprised by some of the ways you can cut back (at least long enough to save for a down payment).
Although no one enjoys depriving themselves of the little luxuries in life, home ownership may just be worth the sacrifice.
Tips For Homeownership Savings
- Become a cord cutter by cancelling cable. According to the National Association of Realtors (NAR), the average cable bills runs $100 per month. Simply cutting cable will put $1,200 in your savings account in one year. If you are addicted to television (no shame in that), the new HDTV antennas are shockingly small and discretely stick to the wall behind your television. Better yet, they can be purchased for less than $20 and provide crystal clear reception of local stations. A subscription to Netflix or Hulu runs $10 or less per month, and you if you have an Amazon Prime membership you already have access to thousands of movies and television shows.
- Pay off your credit cards. While credit cards can be useful (and even help you build credit) the ever-accumulating interest charges mean that you’re essentially giving your money away. Use the “snowball” method to pay your debts off, beginning with the debt with the highest interest rate. Once that bill is gone, add the monthly payment you once dedicated to it to the debt with the next highest interest rate. By the time you have paid off a couple, the process really speeds up and you will be out of debt before you know it.
- Learn to love home brewed coffee. With the average cost of a latte at your local coffee shop in the range of $4.00, you could save $1,100 a year by making your brew at home, even after you factor in the cost of coffee and supplies.
- According to the NAR, the average American drops $232 a month eating out. Eat at home instead and you can save $2,784 in 12 months.
- Get rid of unwanted items. With the advent of online selling venues (including neighborhood sites on Facebook), decide what you can live without advertise it for sell. $10 here and $20 there can really add up and frankly, leave you with less to dust or box up when you move into your new home.
- If you don’t mind your car becoming a billboard until you have your down payment in place, work with a company like Wrapify or FreeCarMedia and allow your car to be wrapped up with an advertisement. The average person can make $400 a month by become a moving advert.
- If you used to work in the service industry, work part-time in the evenings at your old job. If you want to earn money online, look into sites like Upwork or Guru for a second job you would be good at. These sites list everything from web designers to virtual assistants.
- Earmark your tax refund. If you expect to get money back, simply plan on putting it away into your house fund.
- Pack your lunch. The average American worker goes out for lunch two times a week and spends an average of $11 per meal. Simply eating something you brought from home will net you $1,144 in one year.
- If you live in an area with dependable mass transit, consider selling your car. Americans, on average, spend $713 per month on their car, including monthly payments and upkeep. Doing without the automobile until your down payment is sufficient will save you more than $8,500 in a single year. If you need that car, bike and walk whenever and wherever possible. At a minimum, you will save on the cost of gasoline.
If owning a home is important to you, consider the ways you can cut back on life’s niceties long enough to hand that down payment to your lender. While there may be things on this list you absolutely refuse to cut from your life, add up the potential savings from those you can live without to get a sense of what your savings account will look like in one year.
What are you saving for? A home? Learn about Seacoast Bank's mortgage loan solutions.