Saving for your first home’s down payment

For most people, buying their first home is fraught with excitement and responsibility. It marks a turning point in adulthood, especially if one plans to raise a family. It can become a long-term strategy to build wealth. And it’s often a stepping-stone to eventually moving into your forever home.

While buying a house requires planning and saving for the down payment of a house, there is good news. Many have done it and so can you. And quite a few lenders no longer oblige you to come up with a 20% down payment on a house. One can buy a house with just a 3% down, or perhaps, none at all.

Here’s how to save up for your first home.

1. Live smaller

   Eliminate the unnecessary: a new car, eating out or ordering in, and impulse buys. You can also move to a smaller apartment. If you work from home, reduce the frequency of visits to the salon. Switch to home-cooked meals. Compare prices before buying. Purchase big-ticket items when they’re on sale or during off-season.

2. Get a better-paying job and/or side jobs

   Check websites for lucrative job opportunities. Or ask your boss for a raise or a promotion. Look for a side hustle to augment your income. Are you especially good at something? Bank on your expertise by using your talent to make extra money. You can design posters, write copy, offer to repair stuff, become a virtual assistant, and the like.

3. Get a roommate

   Ask a friend to move in or look for a roommate you can share expenses with.

4. Automate savings

   Determine how much down payment you need. Authorize the bank to automatically withdraw this amount from a primary into another savings account.

5. Look into government loans

   Government loans don’t require a down payment since the government itself insures the mortgage. Thus, lenders offer lower interest rates and easier payment schemes.

   • FHA Loans

     Federal Housing Administration (FHA) loans have lower payment and less credit musts. They are approved by the bank or lender recognized by the agency.

     Someone whose credit score is as low as 500, or in the “very bad” range for a FICO score, may apply. Someone with a 500 to 579 FICO score can qualify for a loan if they pay 10% down. Those with a credit score of 580 or up also qualify for just a 3.5% down.

     However, a mortgage insurance premium equivalent to 1.75% of the total loan value is required upfront.

   • VA Loans

     The Washington State Housing Finance Commission (WSHFC) offers VA (Veteran Affairs) loans under the Washington Home Advantage Government Program. These 30-year loans offer down payment assistance of up to 4% on the amount of the initial mortgage loan. Qualified borrowers may buy their first home with zero down payment if they’re willing to pay the PMI (Private Mortgage Insurance). Check out the requirements here.

   • USDA Loans

     The US Department of Agriculture (USDA) issues loans for families with a gross income of not over 115% of the area’s median income. So it’s best to check property eligibility figures in the target location first. A Direct Loan program lets low and very-low-income borrowers own a house in rural areas by raising their ability to pay.

6. Check out other loans

   • Get a conventional loan

     This type of loan is issued by private lenders like banks, credit unions, and mortgage firms. Some are guaranteed by the government-backed Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).

   • Get a jumbo loans

     These exceed Fannie Mae or Freddie Mac maximum loanable amounts. These usually don’t charge higher interest rates compared to conventional loans. But they require a lower debt-to-income (DTI) ratio and higher credit score.

Thinking of buying your first home in Wenatchee, Leavenworth, Cashmere, and Lake Chelan in North Central Washington? Coldwell Banker Real Estate team is happy to help. Call 509.888.8887 or drop us a line at info(at)cbcascade(dotted)com.