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One of the most significant challenges that many people face when preparing to buy a first home relates to saving money for a down payment. After all, this is a large sum of money to have to come up with, which can be very difficult for borrowers, especially those who do not have the proceeds of the sale of their current home to use.
While there are many different loan programs with varying down payment requirements, the fact is that it can still be difficult to save up a large sum of money. Some programs may require you to save as much as 10 percent or 20 percent of the sales price of the home.
Plus, your financial profile and credit score can also determine what type of down payment you would need to make for lenders to mitigate risk. If your financial profile is not that strong, you may be required to come up with a higher down payment amount.
You can employ a few different tips and techniques to save money for a down payment more quickly, and these are some of the options that others have successfully used to save money for their home purchase.
One idea that works well for many people is to make saving for your new home automatic. This may be as simple as scheduling a regular draft or transfer from your checking account when your paycheck is deposited into your savings account.
Some employers may even facilitate this process by contributing some of your funds into a savings account on your behalf. With this option, the money would go directly into your savings account without you having a chance to spend it. Not only would this eliminate any temptation to spend the money instead of put it away, it will also avoid the chances of you forgetting to manually set that money aside.
If your employer provides you with the option of investing in an employer-sponsored retirement account, you should take advantage of this option. Many will offer a dollar-for-dollar matching program, and this may essentially double the amount of money that is saved in the account.
More than that, the funds from many retirement accounts may be withdrawn without penalty if they are used for a first-time home purchase. There are some rules and regulations regarding this, so you should research this option more thoroughly.
These are among the two best options for saving money for a down payment for your first home purchase. There are other ideas that you can consider as well. For example, you may borrow from a whole life insurance policy, obtain a gift from a family member or even sell some of your personal belongings that you no longer need or use.
When you combine many of these ideas together, you may be surprised how quickly your down payment fund can grow. You can also speak with a mortgage professional to learn more about the actual amount of money that you may need for the down payment and closing costs.
Are you ready to apply for a home loan or just have some questions about home loans? We can help. Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region that includes Idaho, Colorado, and Oregon. We have been offering a wide variety of mortgage programs and products with flexible qualification criteria since 1992. Please contact us if you have mortgage-related questions.
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