Coming up with the Cash You Need to Purchase a Home

Perhaps the biggest deterrent to home ownership, aside for credit challenges, is coming up with the down payment. If you are considering homeownership, you may be nervous about the prospect of coming up with what could potentially be several thousand dollars. Of course there are a number of programs that make it possible to purchase a home with no money down, but there are advantages of coming up with at least some cash. For instance, if you put down five or even two thousand dollars at closing you can often get better terms. You will also build equity more quickly and save several thousand dollars over the life of your loan as you have less to finance.

If you are ready to purchase a home don't let a cash crunch stand in your way. There are several things you can do to start building a nest egg that will help you purchase the home of your dreams.

1. Get some advice from your banker or a mortgage broker. You'll learn how much money you should plan to save. Generally, you should expect to put down 3% to 20% of the cost of the home.
2. Contact the community development authority in your neighborhood to learn about available grants, discount programs and incentives for first time home buyers. Your local paper likely also maintains a listing of seminars in your community. You would do well to attend at least one as these programs offer a wealth of information on how you can come up with your down payment.
3. Tap into your savings. Savings accounts and retirement accounts, such as 401k's can be a great source of down payment income. Your retirement plan may allow deductions for the purchase of a home so check with the plan administrator about the rules and any anticipated tax penalties.
4. Increase your withholding allowance and use your tax refund for your down payment. This suggestion is only for those that find it difficult to save the money on their own. If you are not in that group it might be wise to save 10%-30% of each paycheck and deposit that amount in a high yield interest bearing account.
5. Consider a second job.
6. Sell any items of value that you no longer use or need.
7. Make a budget and monitor your spending and eliminate everything that isn't
8. necessary.
9. Ask for help. Friends and family may be happy to give you money toward your
10. down payment instead of gifts for birthdays or other holidays.
11. If you get a raise or another unexpected infusion of cash continue to live as you
12. have and put the additional funds into a savings account.

You can save the money you need for a down payment, but you must have a plan that includes monthly targets and little rewards to help you stay motivated along the way. If it will be helpful, write down some of the things you are looking forward to with home ownership; you can refer to this list when you feel discouraged or deprived by your savings plan. Making a few temporary sacrifices today will help you access the keys to your dream house tomorrow.

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