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May 15, 2019 Home Loans Joshua Williams

Saving for Your First Down Payment

Owning a home doesn’t have to be just an aspirational goal. You have the power to make it a reality. That’s right. There’s nothing stopping you from buying a home. We are going to review some tips on how to save for your first down payment and then look at some options on how to afford the monthly payment once you do purchase a home. Let’s take a look at some ways to raise the funds for that down payment first.

Second Job

If one income isn’t giving you the financial security you need, then a second job is a viable option to help reach your goals. Part-time jobs will typically have a flexible schedule that will allow you to continue your primary employment.

Give yourself a savings goal. Make the goal reasonable and measurable in a short-term time frame. Once that goal has been obtained reassess and decide if you want to continue with both jobs. If at any point having two jobs starts to interfere with the quality of work you produce for your primary career, consider taking a break. It is not worth putting your primary source of income in jeopardy.

Side Hustle

More so than a second, or part-time job, a “side hustle” allows you to work on your time and gives you the potential to earn more money depending on how much effort you put into it. Sales is a great example of a side hustle. There is a trend moving towards a tiered sales system. You may have had a former classmate reach out to you on social media asking about your skin care routine or about nutrition. These acquaintances are hustling. They are making sales and the more sales they make the more money they earn. They will begin to form groups that work under them and the more their group makes, you guessed it, the more they make. This is a way to make money in an ever-growing digital landscape. You are able to not only reach former classmates but you also have the potential to reach thousands more. Before hopping on the sales trend make sure to research your investment. That’s right. There may be costs up front. Make sure the product is authentic and that you won’t end up with an unmovable inventory. Also, make sure you truly believe in the product, especially if “sales” doesn’t come naturally for you. No one wants to hear canned pitches – in fact, it may cost you some friends and followers if you’re not authentic!

Another option is to sell your own hand-made goods. There are plenty of websites that you can easily create a profile to sell through on an online marketplace. Upload quality pictures of your handy work. Make sure to set costs that allow you to make money but also promote healthy sales. Do your research before you begin selling.

Sell, Sell, Sell

Unused, unwanted, anyway you look at it get rid of that clutter. Selling used items is a great way of generating some extra cash. Besides, you don’t want to move all of that old stuff into your new home, do you? Have a yard sale or sell online on an online marketplace. Online resources do typically have a small fee with each sale so keep that in mind when pricing items. If you don’t have a yard to do a yard sale check out Facebook for town-wide yard sales in your area. There are also flea markets, your parent’s or friend’s house (may require some begging on your part), or if you rent, check with fellow tenants if they want to have a building yard/parking lot sale.

Investments

If you comfortable with a high reward and high risk scenario, then you may want to look towards investments and make trades on the stock market. If you are in a position to make a move like this then by all means this is an opportunity to increase your funds in a short amount of time. BUT keep in mind, you can also lose your funds in a short amount of time. This is not the best course for all people looking to save for a down payment. Plan accordingly and prepare for initial losses. Contact Workers Planning and Investment Center to speak with a specialist.

Use an Inheritance or Cash Gift from Family

This is ideally the best option if you have a good relationship with a family member that is in a position to help financially. You will need proper documentation to show the transaction occurred like bank statements from the giver and your bank statement to show the deposit. You will also need a “gift letter” stating that the money is a gift and that no repayment is required by the family member providing the funds. Massachusetts does not require a Gift Tax. There is however an Inheritance Tax. If the funds are procured through an inheritance make sure to plan ahead for tax filing purposes.

How to Pay for It Once You Get It

Buying the house isn’t the end. Owning a house is an ongoing deal. Home owner’s insurance, heat, electricity, cable, internet, not to mention upkeep like landscaping, exterior upgrades and fixes. It’s about maintaining your investment and making it a place that you are comfortable living in. Keep this in mind when you are budgeting for a home. You may be able to afford the monthly payment but can you afford the home in its entirety. Plan accordingly.

Second Job Continued

You may have to continue working at a second job or side hustle in order to sustain your savings. Once you have made your down payment you don’t want to completely deplete your savings account. But you may want to consider cutting your hours if it’s too much. Driving for a ride share company like Uber or Lyft where you can make your own hours and get perks for using your automobile could help maintain your savings.

Roommates

The house is in your name but that doesn’t mean you can’t have people live with you. Friends and family can help out with the monthly payment by renting them a room. Even if it’s just a part time living arrangement, any help with the mortgage payment is a plus. Make sure to have a contract signed for the agreed upon share of the payment each month. Include the agreement for utilities like heat, water, cable, internet, and so on. It is important to set ground rules for the home. Pick a friend or family member that you trust and get along with otherwise you may be left in the lurch.

Low Down Payment Mortgage Options

Most financial institutions offer mortgage options. Workers has a First Time Homebuyer program that helps people looking to buy their first home. An experienced mortgage team walks you through the process step by step getting you into the right loan that fits your needs like possibly applying for a government backed loan. These loans include:

• Federal Housing Administration (FHA) – Backed by the Federal Housing Administration these loans can offer a much lower down payment requirement. There are also lower credit score requirements to allow even people that have gone through a hardship to own a home.

• Veterans Association (VA) – Backed by the US Department of Veteran Affairs, members of the military, veterans, reservists, and National Guard members are eligible for this loan. Spouses of military members who died while on active duty or as a result of service-connected disability may also apply. A down payment is not required for a VA loan.

We hope this is a good start for you to begin saving for your first down payment. It will take a lot of planning and hard work but you will find it that much more rewarding in the end. Most importantly, shop around for the best interest-bearing account to put the money you’re saving… at WCU,  we recommend a cuSave high-interest savings account. If you are ready to move forward with applying, reach out to our mortgage team to apply today!