Buying a home is an expensive ordeal. This can make the purchasing process seem daunting, but there is ultimately no better way to build wealth and equity than homeownership. Before you can purchase a home, though, you will need to save for a down payment. Today I’ve got five tips on how to afford this necessary expense in the home buying process.
1- Look into low down payment options. Many homebuyers assume that they’ll need a down payment amounting to 20% of the purchase price. This is actually not the case. There are many loan programs that allow buyers to put down significantly less. An FHA loan, for example, only requires you to put down 3% in most cases. And veterans may find that taking advantage of the VA loan is beneficial, as it allows buyers to skip the down payment altogether.
2- Make use of down payment assistance programs. There are many options that can help buyers achieve a more affordable home purchase. For example, Orange County homebuyers with a gross household income less than $174,000 can qualify for a program that essentially provides gift funds toward a down payment. The only things many of these programs will require you to pay out-of-pocket are closing costs.
3- Borrow money from your 401(k). You will need to have a discussion with your 401(k) administrator before doing this, but applying these borrowed funds can be a viable course of action.
4- Obtain gift money from a family member. Whether it comes from your parents, your spouse, or another close member of your family, gift funds can go a long way in saving for a down payment.
5- Save money by reducing your monthly bills. Renegotiating your rent, being more conscious of your energy usage, and cancelling monthly subscriptions are all great ways of saving money that can then be put toward a down payment.
If you have any other questions, would like more information, or would like help strategizing your home purchase, feel free to give us a call or send us an email. We look forward to hearing from you soon.