Real Estate Blog

    Aug
    11

    7 Ways to Get a House Downpayment

    7 ways to get a house downpayment

    Purchasing a home is a huge accomplishment, but it can be a challenge. One of the biggest obstacles to home ownership is your house down payment. Putting more money down generally means you’ll receive better loan terms, and you might not have to pay private mortgage insurance (PMI). So how do you save for a house down payment? We collected a few ways that can help you get a house down payment, including opportunities available that can help reduce the amount you need, as well as budget-tightening tips. 

    7 Ways to Get a House Down Payment 

    To get a house down payment, you’ll want to save and stick to a budget, but you’ll also want to know all the opportunities available to you. Some first-time homebuyer programs provide assistance for your down payment, or even allow you to forgo your down payment all together.

    Before we get into the ways to get a house down payment, keep these principles in mind: 

    • Improve your credit score: Don’t go into debt so you can save for a house down payment. Improving your credit score is another important part of getting a home loan. 
    • Budget realistically: It’s better to look at a smaller, more affordable home down payment and home loan than to budget at the razor edge of what you can afford. Keep in mind that unexpected expenses do sometimes arise. 
    • Stick to your budget: With a bit of planning ahead of time, you can create a budget that will help you save money and cover your expenses. Once you have a good budget planned, stick to it as much as possible. 
    • Research loan programs: Look at the home loan programs available for first-time home buyers. These can be crucial to saving for a house down payment.  

    1. Look for Down Payment Assistance Programs 

    To encourage consumers to buy homes and make home ownership more attainable, a number of home loan programs offer down payment assistance. While budgeting for your monthly payments will still be essential, these programs can make getting a house much easier. 

    For most home loans you’ll need at least a 3.5% down payment, but VA loans for veterans allow retired or active service members or their surviving spouses to purchase a home without a down payment. The HomePath Ready Buyer program also offers down payment assistance with a buyer education course. The Good Neighbor Next Door program also offers assistance to police officers, firefighters, emergency medical responders and teachers who purchase homes in select areas. The Michigan State Housing Development Authority (MSHDA) MI Home Loan program provides assistance with completion of a homebuyer education class. Look into programs that you might qualify for, both nationally and in your state, to get a house downpayment more easily. 

    2. Start With an Affordable Home

    It may be tempting to look for your forever home right away, so you don’t have to move and conduct the homebuying process over again later on. However, even a 3.5% down payment is significant on a $200,000 home. Consider purchasing a smaller, more reasonably priced home to start with. If you’re knowledgeable about construction, you may be able to make home improvements and build equity. If not, your home is likely to continue increasing in value as long as you maintain it. As you pay off your loan, you’ll gain equity anyway, and you’ll be able to stop paying rent. When you’re ready to move up to a larger home, your original home will help you cover the down payment costs. 

    3. Ask About Gifts

    Using gifts from friends or family for home down payments is becoming more common. This can seem like a lot to ask of your loved ones, but consider gifts you might forgo for a house payment. For example, many friends and family members give money gifts at weddings or graduation parties. Parents may offer to pay for a wedding celebration, or part of one. Ask your loved ones if they would be willing to offer a gift on a house downpayment instead. 

    4. Use Automatic Deposit 

    The most common way to get a house downpayment is to save money. To make this process easier, set up an automatic deposit system with your bank. Your bank will automatically transfer a set percentage of your check or cash deposits into another account set aside for your house downpayment. This way, you won’t be tempted to overdraw or accidentally overspend. 

    5. Look for Affordable Alternatives 

    We sometimes take on expenses without realizing there are more affordable alternatives. This is a good place to start trimming your budget, since it won’t alter your daily life as much as forgoing an item or activity altogether. As you take a look at your budget, highlight large or regularly occurring expenses, and look for alternatives. A simple search like “alternatives to…” is a great place to start. 

    Here are a few expenses and alternatives to consider: 

    • Phone plan: Many consumers opt for unlimited data plans without considering how much data they actually use. Look into your phone’s settings and see how much data you use. Could you connect to your internet at home, work, or public locations to reduce your data use and opt for a cheaper plan? 
    • Entertainment: Subscription TV services can start to add up if you have several. Consider renting shows or movies from your local library instead, or sharing subscription services with friends and family. 
    • Internet: If two or more ISPs serve your area, switching can help you cut your monthly bill substantially. Many ISPs offer promotional rates for new customers. 
    • Thrifting therapy: If retail therapy is a stress reliever for you, making a budget can be particularly difficult. Consider satisfying your buying urge at a thrift store instead of buying new. 
    • Borrowing: If you need an item for a limited time or a particular task, see if you can borrow it instead of buying. This can include everything from household tools to special outfits, camping gear to books, and much more. 

    6. Reduce and Save  

    Reducing luxuries is the most common budgeting tactic. This doesn’t mean you have to eliminate every luxury in your life. In fact, this level of strict budgeting probably isn’t sustainable. However, limiting certain luxuries to once a week, month, or year can help you save money and look forward to treating yourself. 

    • Eating In: Eating out or getting delivery can add up costs quickly. This includes restaurants and lunch spots as well as coffee shops and sweet treats. If this is a significant part of your budget, see where you can cut down. Instead, you might make a special coffee at home to take to work more often, or arrange a candlelit dinner with your partner or friends at home. 
    • Affordable Vacations: You should still enjoy your life while you’re saving and trying to get a home down payment. This means you should still treat yourself to a vacation. However, consider where you might save money. Look for affordable Airbnb options instead of hotels, choose a location you can drive to instead of flying, and look for low-cost entertainment options, like parks, museums, or beaches. 
    • Reduce Vices: Take a look at your budget, and see how much you spend on unhealthy habits, like sugary foods, alcohol, or tobacco. Buying these items less often and replacing them with a cheaper, healthier alternative (vegetables, sparkling water, chewing gum) can have a positive impact on your health as well as your wallet. 
    • New Habits: As you look at your budget, some items are bound to stand out. If you’re spending a lot on a particular activity or item, consider how you might cultivate new habits to reduce your spending. If, for example, you spend a lot of money going out to eat with your friends, consider starting a potluck tradition at home.  

    7. Add Income 

    Finding extra sources of income can also help you get a house downpayment. Combine this with a well-planned budget and you can start to grow your savings quickly. If you have some free time or some hobbies you might monetize, you can turn this into a source of extra income. This can help you expand your skill set and even reduce some bad habits, but remember that your free time is also valuable. Set aside time just to relax, so you don’t get overwhelmed. 

    There are many different ways to monetize your hobbies or free time. Consider some of these, and search for other opportunities within your interests as well: 

    • Sell Crafts: From dyeing t-shirts to creating paintings, photos to woodworking, music to greeting cards, there are countless ways to put your artistic talent to work. Consider selling your crafts on a website like Ebay or Etsy to get started. 
    • Freelance Skills: If you know how to create software, edit photos, do handyman jobs, edit text content, or another special skill, see how you can start freelancing on websites like Guru, Upwork and many others. 
    • Work with Pets: Pet-sitting, dog-walking and other pet services can help you gain extra income and meet new furry friends. Sites like Rover and Care can connect you with pet owners looking for extra help. 
    • Monetize Your Hobbies: Get creative, and see how you could monetize what you already do. If you maintain a strong work-out or running routine, perhaps you could train a student. If you have a green thumb, consider selling seedlings and plant starts. If you love learning trivia, see if you could write quizzes or edit articles. To monetize your hobbies, consider how your activities might be valuable to someone else, and then how you might reach them. 

    Combining these strategies to get a house downpayment can help you reach your goals faster. Remember that your mental and emotional state is also a priority, so don’t restrict your budget too far or spread yourself too thin. Do your research, be patient, and make a sustainable plan that you can stick to. 
     

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