Ease Your Anxiety: Start Saving for Your Down Payment

Purchasing a home—it’s the American Dream and an incredibly exciting milestone; however, it certainly comes with its own level of intimidation and fear as well. As the most expensive purchase you’ll probably ever make, it obviously requires a level of responsibility that goes above and beyond buying a large appliance—or even a car—but if you’re slightly daunted by the idea of saving for a down payment, here are a few tips to get the ball rolling.

DON’T OVERSPEND

After the market collapse in 2007, we’re all relatively aware of the dangers involved in spending beyond our means; therefore, when determining what you would like to spend, it’s important to remain realistic and pragmatic. While you may find yourself with approval for a full-price loan, it doesn’t necessarily mean you should blindly accept it.

Instead, be smart and stay within your predetermined budget. Yes, splurging on a home may feel good in the short-term and create an abundance of excitement, however, when those sizeable bills hit your mailbox, you may find yourself somewhat less than cheerful.

SET GOALS

After you’ve determined your price range, make a point to set a down payment goal. Generally speaking, 20% has been the long-standing norm, which is smart for a variety of reasons, especially since interest rates tend to be lower with higher down payments.

BE PREPARED

As with anything, preparation is key, so it’s important to have your finances in order before you attempt to purchase a home. In general, you should already have a stable income source and understand how to budget, but you should also have control of your debts and a clean credit report.

INCREASE YOUR SAVINGS

If purchasing a home really means a lot to you, then make a point to do everything you can to put some extra money in your pocket. By creating multiple streams of income—even if it means taking on another job or selling some of your belongings on eBay—you can drastically speed up the process.

Also, pay attention to where you can trim the fat in your budget by taking notice of where you can make reductions in your daily expenses.

DON’T FORGET ABOUT YOUR IRA

If you’re considered a first-time homebuyer by the IRS, you can withdraw up to $10,000 from your IRA to pay for your down payment—$20,000 if you’re married ($10,000/person).

While you won’t be hit with an early withdrawal penalty, you will still be forced to pay all applicable income taxes it, so it’s important to consider whether this works for your particular situation.

FINAL THOUGHTS

In the end, purchasing a home is a process and should be treated as such. Make a point to exercise patience, sensibility, and realism, and understand that the more information you have, the better prepared you’ll be.

Pam Wright | OnQ Financial | www.onqfinancial.com | 404-445-1033