The spring real estate market is here and is sure to continue to heat up! If you are looking into Belleville homes for sale, you are likely considering the down payment you'll have to invest. Saving adequate money for the down payment is a hurdle for many, but a solid savings plan makes homeownership possible. Our real estate agents have compiled an easy guide below to get you closer to owning your dream home.
Most homeowners hesitate to start the homebuying journey because they can't make a 20% down payment. While many mortgage lenders demand a 20% down payment, you can put as little as 3% down with a fixed-rate conventional loan. You may pay for even less or no down payment if you qualify for a VA or USDA loan.
The best strategy is to start saving well before you start house shopping. Use your pre-approval amount or home budget to determine how much you need. For example, if your budget is $200,000, plan to save $20,000-$40,000, that is 10-20% of the down payment.
The down payment amount may be intimidating, but it's attainable with some creative strategies. These tips include the following.
- Add Down Payment Savings to Your Budget
The homeownership journey starts by making room in your budget. List all the places your money goes every month and determine how much you will put away for your down payment.
You may need to cut some expenses, such as eating out or taking vacations. Some creative ways to reduce your expenditure include moving into an affordable neighborhood, getting a roommate, or spending less on trendy clothes. The goal is to make down payment savings a nonoptional expense.
- Boost Your Income
Look at ways to increase your income, like negotiating for a raise or working overtime.
Side hustles like ride-share driving, dog walking, or tutoring will help you reach your savings goal in a shorter time. Selling used goods is another great idea to bring in more money.
- Automate Savings
If your down payment fund is easily accessible, you may be tempted to use it for other purposes. So, establish a different savings account for the down payment and contact the bank to make automatic deductions every month or week. You will find that you forget about these funds while your down payment grows.
- Reduce Your Debt
Mortgage lenders consider an applicant's debt to income ratio and may require a higher down payment if you have a lot of debt. High-interest debts, including student loans and credit card debts, can especially affect your ability to save for a home.
If paying off your debts seems unattainable, start by clearing the smallest high-interest debt and move on to larger debts or refinance your current debts to free up some money.
- Look Into Down Payment Assistance Programs
Local and federal agencies offer various programs to encourage homeownership. Eligibility varies between these programs.
Non-profit organizations also help people with low to moderate incomes become homeowners. Your state's Housing Finance Agency is an excellent place to start your search for down payment programs.
Saving for a down payment is taxing but entirely possible. In addition to a savings plan, you can simplify the buying process even further by consulting a seasoned real agent who understands your needs. Contact us to explore your options.