How to Increase Your Down Payment When Buying Your First Home
Buying a home is something everyone dreams of, but many feel that it is not attainable because it can take so long to save up for the down payment. This all-important, beautiful step of a person’s life can come a lot faster if you start saving early, but also if you do your research and find a few smart ways to increase your down payment.
Obliterate Credit Card Debt
While it may not make a lot of sense to pay off big bills to save, this is one of the most important things you can do. Simply put, don’t buy things you can’t afford. If you can’t pay the purchase on your credit card off within a month, don’t make it. Minimum payments have a way of adding up and credit card debt can really pile up. Getting rid of a monthly credit card bill completely allows you to save up for the things you really want – such as a house.
Save in Different Ways
Sure, putting money away in a savings account that draws minimal interest is one way to save money. However, there are other ways to save that are a little more proactive when you’re saving up for your first home. A CD is one good way to save some cash, well before you’re preparing to make that down payment. Invest in CDs that all have different maturity rates, perhaps in three, six, and nine-month gaps. This is a process known as laddering that can really bolster your savings when the time is right.
Borrow From a 401K
A million financial articles have probably told you not to tap into your 401K. Generally, this is true. You don’t want to tap into this fund to buy a car or pay off credit card debt. However, buying your first home is a little different. If it’s a company plan, you may have to pay the money back, so keep this in mind when you’re figuring out how much mortgage you can handle. However, this is a good way to get extra funds when you need them the most. It’s also a sensible idea to take out a small unsecured or secured loan to help plump up your down payment. Sites such as ukhomeandpersonalloans.co.uk/ have over 200 loan plans to choose from to tailor to your specific needs.
Tap Into an IRA
Similarly to tapping into your 401K, this is a great way to make some extra funds appear. The IRS allows first-time homebuyers up to $10,000 in IRA funds as a down payment. The IRS definition of “first-time homebuyer” is very loose, so being a first-time homebuyer may apply to you even if you think it might not. As long as you have not been the chief owner of a principal residence within the past two years, you probably qualify for these IRA funds.
It’s always best to save, save, save. However, it’s okay to tap into your savings when you’re trying to put together a down payment for a house. A good mixture of saving ready cash, loans and help, and using resources should get you into your dream home.