Even before you started looking at homes for sale, the idea of the challenges that you might face concerning saving for a down payment likely crossed your mind. Thinking ahead is a wise move in the home buying scene and will work in your favor.
In fact, many real estate professionals recommend starting to save two to three years ahead of your buying plans if your finances are questionable. Here are three simple steps for successfully reaching your down payment goals.
1. Start a Dedicated Down Payment Savings Account
Open a separate bank account solely to stash funds for the down payment. Try to establish a set amount to contribute to the account every pay period. By setting up an account online, it may be possible to secure a higher compound interest rate on deposits.
2. Reduce Debt and Current Interest Rates
If you ask your creditors for an interest reduction, many will comply if you have been making timely payments and are a long-time customer.
However, more importantly, a lot of money can be saved by reducing your overall debt such as credit cards, which can limit your savings ability.
Pay off balances on high interest cards first and watch your credit score improve—a huge benefit when applying for a mortgage.
3. Sell Investments or Borrow from Retirement Plans
You can view selling investments as part of the process of making another investment that you can use now. With a wise purchase, you might even see a greater return on a home investment that current ones.
Look into options for borrowing from a retirement plan, preferably a penalty-free withdrawal is available. Certain company sponsored retirement plans allow employees to ‘borrow’ against these savings for a home purchase.
If you still need help, there may be a local, state or government organization that can help you with down payment assistance.
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