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Trying to buy a home? Here’s some tips on saving for a down payment

Posted at 5:55 PM, Aug 16, 2018
and last updated 2018-08-16 18:00:48-04

Saving for a down payment on a home can seem overwhelming.

Carlson Financial representative discussed actionable steps you can take to get into your dream home faster.

A big question that comes up is how much should someone really have saved for a down payment?

Let's say they want to buy a $250,000 house. It's ideal to have a 20% down payment, so in this case, $50,000.

But that's a lot of money! There are other options and it would be possible to buy that same house with a down payment of $8,750 with an FHA loan (Unless you qualify for a VA loan, which many people in this area might).

There are trade offs though for putting less down. Less money down means your monthly payment will be higher, and if you put less than 20% down you will also have to pay mortgage insurance, also leading to a higher monthly payment.

Work with a mortgage adviser or financial adviser to come up with an attainable down payment that will help you get the home you want and monthly payment in your budget.

One of the best ways to save is to automate your savings in any way you can - this way you don't have to think about it.

Set up automatic monthly transfers to a savings account or have it go right to a savings account from your paycheck. Another way to save is to keep anything "extra" that comes your way: raises, bonus, tax refunds, instead of spending them.

There are programs like 'Acorns' and 'Keep the Change' which round up all your purchases to the nearest dollar, but put the change into savings.

You can also use a cash back credit card and save the cash you get back.

If you have a car loan or student loans, you might consider refinancing to get a lower monthly payment, and save the extra money.

If you're considering borrowing money for a down payment, maybe from parents or grandparents it's not impossible but generally lenders like to see that it's your own money, so they know you have "skin in the game."

You could borrow from yourself though, if you have other sources like a 401(k) or IRA.

First time home buyers can take up to $10,000 out of their IRA, so a combined $20,000 for a married couple.