According to the National Association of Realtors(R), 30% of younger home buyers say that pulling together the funds for the downpayment of a new home is one of the biggest challenges. Plus, in today’s market, those downpayment funds can be challenging even for older homebuyers. If you’ve got your heart set on one of our homes in Salem AL, here are some tips for saving money for a new home and no, we’re not talking about giving up avocado toast.
The reality is that you could be looking at up to $75,000 for a 20% downpayment on a home in the median price range of $375,000. That’s a lot, and not everyone puts down that much. With certain loans, you can drop the down payment lower. Still, you need a downpayment. The best way to start is by creating a specific savings fund for your down payment – and pay it first!
Automatic recurring transfers are the best way to make sure the money you plan to put into your savings goes in and doesn’t get quickly eaten up with your checking account. Automatic transfer helps it feel like the money was never there, so you can budget the remainder appropriately. The money is there for an emergency, but you’re less likely to touch it otherwise.
While it may be tempting to put the money into stocks for the chance at a higher return, there’s always the very real risk that you could lose a lot of your money. It’s better to choose a high-yield savings account for money that you’re going to want to access within a year or two. The interest isn’t great, but it’s safer and at least you’re getting some money, rather than having it just sit there. If you look around online, you’ll find some good options. If you’re looking more at three to five years, stocks, or even savings certificates could be an option, but they remain risky if you happen to find your dream house sooner than expected, as there can be losses and financial penalties for early withdrawals. Thus, the high yield account is your safest bet in the long run.
These days, people are making the most of social media and GoFundMe-style accounts to also help raise money. You don’t have to beg for money, but you can set up accounts with sites like Feather The Nest and as birthdays and holidays roll around, you can ask friends and relatives to donate, rather than buying you something or taking you out for a fancy meal. If they feel like adding extra along the way, even better, as a lot of the sites let people see how close you are to deadlines and goals. It’s up to you how much you feel comfortable promoting it, but it’s certainly worthwhile for times when people would normally give you a gift of some sort. Even if you don’t set up an account, ask friends and family for donations to your home fund rather than gifts or meals and then put it in your dedicated savings account.
Rather than asking for money, you can make use of apps and websites that help you make the most of your money and sometimes even add some to your account. For example, Lower, which has a high yield FDIC savings account, has a program called HomeFund with a 0.75% annual yield. When you sign up they give you $500 to put toward closing costs. The app also helps you check out various lenders to find a mortgage. Other apps like Acorns round up your monthly credit card payments and funnel the excess to your designated savings account, so you don’t feel the pinch of adding extra to your savings quite as strongly. You add money without really noticing.
If you currently rent – and maybe want to improve your credit score in the process – apps like Bilt Rewards award you points every time you pay your rent on time and those points can be turned into money for a down payment.
Finally, if you typically get a check back at tax time, consider changing your withholdings. That’s money of yours that the government is holding. If you forgo getting that check, which is your money anyway, you can put that money into your savings account and let it do more for you. Talk to an accountant to make sure you find the right balance between owing and getting money back. It’s better to owe a tiny amount than get a large refund that could have been working for you all year.
Sure, pinch pennies where you can. Dine out less, make your own coffee, drop a streaming service and put that money into your savings, but for significant savings, you need to make your money work for you as well. Before you know it, you’ll be ready to make that downpayment on one of our great homes in Salem AL.Tags: homebuilder salem al, new homes salem alabama, salem alabama new homes
This post was written by Rose Anne Erickson