As many potential homebuyers are quickly discovering, buying a house nowadays requires a down payment. Certain home loans, such as VA home loans and USDA home loans do not require a down payment. Unfortunately, some buyers do not qualify for these programs, and they have to go with either a conventional or an FHA home loan.
Saving up for a down payment is a challenging aspects of buying a house – next to improving your credit score. However, for those buying a home with a spouse, saving up for a down payment may be less challenging, as there are two people contributing to the fund.
But just because you’re single and interested in buying a house on your own doesn’t mean that you can’t drum up the cash for a down payment. It might take you a little longer depending on your income, but it’s definitely possible.
1. Use your tax refund.
If you’re single and have children, chances are that you will receive a tax refund at the end of the year. I know, it’s tempting to use this money on other things, such as bills or maybe a nice vacation. But if you’re serious about owning your own place, consider depositing all of your tax refund into a high-yield savings account or a certificate of deposit. This can jumpstart your down payment fund and help reach your goal sooner. Make sure that you compare CD rates and go with the bank that offers the highest return.
2. Get a part-time job.
Working a second job may be the last thing you want to do, but think of it as a temporary sacrifice to achieve your goal. With an FHA mortgage loan you’ll need at least a 3.5% down payment. If you’re buying a $200,000 house, that’s approximately $7000. If you can generate an extra $600 a month – or $150 a week – you can reach your down payment goal in about 12 months.
3. Slice your monthly bills.
Consider where and how you spend your money and look for ways to cut back. Saving up for a down payment will take sacrifice. What does this mean exactly? Well, you may have to let go of your gym membership, and if you subscribe to some services, like Netflix, Hulu Plus or Spotify, canceling these services can keep cash in your pocket.
And what about your Internet and cable services? Do you really need these? Do you have weekly hair appointment? Do you hire someone to clean your house? These miscellaneous expenses can add up quickly and take your extra cash, thus delaying your plans of buying a house.
4. Move in with your folks.
So, the thought of moving back home – even if only temporary – may not sit well with you, especially if you have kids. But if your parents are agreeable to this arrangement, this is an excellent way to save up for a down payment. And since you can essentially eliminate 90% of your regular monthly expenses, you can possibly reach your goal faster and be on your way.
Don’t let anyone tell you that you can’t save for a down payment on your own. Even if you earn a modest income and don’t have a lot of disposable cash, determination and a good savings plan can provide what you need.