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How to Save $ For a Downpayment on Your 1st House

Posted on October 26, 2015 at 2:00 PM

When owning a house starts to become more of a reality than a dream, one of the first things that the new home seeker must consider is the down payment. How much should it be? How will I get it? How long should I be saving for? All of the aforementioned questions are sure to arise during the initial decision to become a homeowner. This article has a few pointers that you can use today, while saving for a downpayment to buy a house.

Timing

The decision to buy a house shouldn’t be taken lightly. The buyer’s remorse over a ‘bad’ house purchase will feel awkwardly worse than buyer’s remorse after leaving the shoe store. If the plan is to buy a house within the next few years, then the preparations must be started today (or as early as possible), especially for those of us that lack major social capital. Parents, grandparents and other close relatives may be able to contribute to the down payment on your first home. But for those without this luxury there are other ways in which a 'home dreamer' can save up for the downpayment.

• Rent cheaper

• Live off one person’s salary

• Tapping into the IRA account


Rent a cheaper apartment

While moving into a new neighborhood with a good steady job, it would be a good idea to rent a cheaper apartment even though it is possible to get a better one in a hip neighborhood. The idea here is to save up for a good downpayment. Even if both the spouses earn a good income and have steady jobs, this would help them get a better house in fewer years than they initially planned. It’s called living how you have to now so you can live like you want to later.

Bank one person's salary and live off the other's

When spouses plan to buy a house, it would be advisable to use only one person's income to conduct the daily expenses. The other person's salary can be saved in full. This would not only help them cut down expenses and avoid unnecessary purchases, it would also give them a nice and tidy sum when it is time for the downpayment.

Tapping into the IRA account

Most people are tempted to tap into their IRA account when they want a house. As long as they don't own primary residences at the time, this would be a good move. Though it is not necessary to pay an early withdrawal penalty, homeowners would have to pay applicable income taxes on the amount withdrawn. But this move must be done with careful consideration because the homeowner would be giving up his tax-free growth for a very long time. Please be sure to speak with your estate planner, CPA, or other professional before moving forward with this strategy.

For details and information on how to save money for a downpayment, and on grants and programs, contact Harris Homes @ 443.219.7465 today or visit the Resources Page! Our site is filled with more informational material. Knowledge is power! See you at the top!

 

Categories: Real Estate, Financial Literacy

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