One of the biggest deterrents to buying a home is being able to afford the down payment. The more you can pay for the home upfront, the better your loan options and payment plan will be. It is recommended that you pay about 20% for a down payment, but other financing options are available. If you are looking to buy a home in St. George, use these tips to save for your down payment.
Create a Budget
The first step to saving for a down payment is controlling how much you spend and save. The only effective way to do this is through budgeting. Budgeting software like Mint.com can help you track money more effectively and reach your ultimate goal of downpayment.
Look for Ways to Save
As you start to create your budget, you may realize you are spending more money in certain areas than is necessary. Is your gym membership still making automatic withdrawals even though you stopped going months ago? Is there a way to bundle your cable, internet and phone bills to save money? Or could you ditch the cable bill altogether and opt for a Netflix or another online subscription service instead? Analyze your budget to find ways to save.
Open the Right Account
When you start collecting a substantial amount of cash to go towards your down payment, make sure you have the best account option. Experts recommend a high-yield savings account or certificate of deposit. Talk to your bank or a financial advisor to determine which account will be the best option for you.
Automatic Savings from Pay Check
There are two ways to save from your paycheck automatically. First, if your employer uses direct deposit, you can ask them to deposit part of your paycheck into a savings account. This removes any temptations you may have of spending the money before it hits your savings account. Then, if you typically receive a refund from your taxes, you can use this as a way to save as well. Make sure to get as large a portion of taxes removed from your paycheck as possible, then deposit all of your refund check into your savings account to go towards your down payment.
Use Funds from a Roth IRA
If you have a roth IRA account, or plan on opening one, you can make a one time withdrawal of $10,000 or less for a first-time housing purchase. You must have had the account for five years or more, and the money from this withdrawal must go towards your down payment. So if you are using a Roth IRA for a retirement account, this could be a good way to pay off a big chunk of your down payment. Talk to a financial advisor to decide if this is a good decision for you, though, since it could set back your retirement savings by quite a bit.
These are just some of the ways you can save money for a down payment. Owning a home in St. George is possible with a little bit of planning and creativity. Use these tips to get you started!