Down Payment Tips

Down Payment Tips

The down payment is one of the most important parts of the process when it comes to purchasing a home. For first time home buyers, saving up enough for a down payment can be crucial when it comes to securing the loan that you want. Here are some down payment tips that will help you get through this process faster and easier so you can improve your chances of securing a loan.

Know Where You Are Financially

Everything starts with looking over your finances to see where you are and what you need to accomplish. You can start by making a plan to save up enough for a down payment which is generally 3-20% of the total cost of a home. Next, look over your own finances on a daily, weekly, and monthly basis to see where you are spending money so you can make the necessary adjustments. You might be surprised to find that you are overspending on items that otherwise cost a fraction of the amount. For example, brewing your own coffee instead of hitting the coffee shop can save you hundreds of dollars a year, if not more.

Create a Savings Plan

Now that you know where you are financially and where you want to be, create a plan that gets you there on a day by day basis. For most people, there are no shortcuts to saving, but you will be surprised at the amount you can put back over six months to a year’s time if you focus on your daily spending routine. It helps to talk to a loan officer now so you can find out how much money you need to save up and put aside.   The loan officer can also let you know the purchase price you will be eligible for if you save up a certain amount of money.

Think Savings

The easiest way to save is having the company you work for direct deposit a certain amount into your savings account. That way, it is never in your hands. Barring that, you should simply transfer the appropriate amount from your checking to your savings account each month. 10% to 20% is the goal each month so you can put back what you need.

Grant Money

In Illinois, they have something called an IHDA loan.  IHDA stands for Illinois Housing Development Authority but more importantly, IHDA is free money for first time home buyers!  Buyers can get up to $7500 in down payment assistance with this grant.  There are also other down payment assistance programs all across the United States, you just have to do a little digging.  Having a great loan officer, will help you utilize all grant money available.  You can learn more about IHDA by visiting https://www.ihda.org/my-home/buying-a-house/getting-an-ihda-loan/

Gift Money

Many times when buying a home, you are allowed to be gifted money from relatives or friends.  You will want to speak to your loan officer for more information but this is another way to come up with money for your down payment.  One caveat to this is that it must truly be a gift, it cannot be a loan.  So someone has to really like you in order to give you a gift for your down payment that they will never get back.

Other Sources of Income

Your paycheck may not be the only source of income that you own. Take your tax refund and invest that as part of your savings plan. Plus, you can earn money by selling some items that you no longer need by selling things on craigslist and Ebay.  If you haven’t used something laying around the house for over 2 years, sell it!  Uber is also a great way to earn extra money if you have a reliable vehicle. If you can work two jobs, use the second one as your savings for building up a down payment. You’ll find that working for six months to a year might get you more than the money needed.

For first time home buyers, these down payment tips will help you get on the right track towards saving enough money to get a home loan. When you think about it as a daily effort, it helps to focus your mind and stop overspending your money. Make sure to talk to a loan officer right away if you are looking to buy a home in the next couple years so you can strategize and make a custom plan tailored toward you.