Buying a home is a dream that many people have, and while it may seem unattainable, hard work and planning can make it happen. One thing that many people see as a barrier to purchasing a home is the down payment in cash required. Different types of loans require different down payments, which are based on a percentage of the total loan amount. While some loans require lower down payment amounts, having a larger down payment can help you avoid having to pay mortgage insurance each month. USe the following tips to save up a down payment to buy a home.
Evaluate Your Budget
If you are serious about buying a home within the next several months or couple of years, the first step is to carefully evaluate your budget. Many people waste money each month without even realizing-- it could be by eating out several times a month or purchasing expensive coffee drinks a few times a week. Small purchases may not seem like much, but over time they can add up to a lot of money. If you want to reach your down payment goals, having a strict budget can help a lot. Make sure that every dollar is accounted for and have a specific savings goal each month that is earmarked for your future home's down payment.
Make Your Money Work for You
Home prices vary widely across the country. In a low cost of living area, it may be easier to come up with a decent down payment compared to a very high cost of living area where even standard single-family homes can cost hundreds of thousands of dollars. No matter what homes cost in your area, it can be a good idea to do what you can to make your money work for you. Don't leave your down payment fund in a standard savings account that you opened at your local bank-- look for a high yield savings account or money market account that will give you more interest on the money that you deposit. If you don't plan on buying your home for a few years, it can also be a good idea to put your down payment savings fund in a certificate of deposit (CD).
Consider a Loan from Your Retirement Accounts
While it is rarely recommended to take a loan from your retirement accounts, using the funds to purchase a home is often considered an exception. Buying a home is an investment, and over time your home will appreciate and gain value. If you have saved a good amount of money for a down payment but are still short of what you need, it may make sense to borrow from your funds in a 401(k) or IRA to make your dreams of becoming a homeowner a reality.