How to Save Cash for a Down Payment
July 10, 2013
Hiring a mover might take the stress out of moving into another house. But before you can get to this point, you have to make sure that you’re able to qualify for a home loan.
If you think that getting a home loan will be easy, you’re sadly mistaken. Home loan requirements have changed in the past 4 to 5 years, and if you apply for a mortgage today, you will need a down payment. Down payments for conventional mortgages are around 5%, but if you apply for an FHA home loan, you may be able to get approved with a 3.5% down payment
If you don’t have cash in the bank now, you might have to postpone your plans of purchasing a home. But with a careful savings plan, you can reach your goal and meet the lender’s requirements.
- Reduce how much you spend. Track your spending for an entire month to determine how much you spend on recreation, entertainment, groceries and other non-fixed expenses. Sometimes, saving money for a down payment can be as simple as reducing how much you spend and prioritizing.
- Save any lump sum of money. A year-end bonus from your employer or a sizable tax return might be an invitation for a shopping spree or vacation. But if you want to purchase a home, set this money aside for your down payment.
- Borrow from your 401(k). Only borrow money from your retirement savings account if you’re committed to replacing the funds. It taking a 401(k) loan to buy a house, you’re typically given between seven and 10 years to repay the money. If you don’t repay the money. You’ll pay a 10% penalty, plus you’ll get hit with taxes.
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