If you’re like me, you’ll want to find every way you can to save a buck. But if you’re a first time home buyer along the Elgin Fox Valley, it can feel nearly impossible to come up with the downpayment on a home. Today’s lenders are starting to ease the restrictions on credit a bit, but it’s still a good idea to have 20% to put down on a home. Why? In the first place, it lowers your overall mortgage amount. Second, it shows you are committed to keeping up on your mortgage payments because if you default on your mortgage, you lose the 20% you put down. Ouch. Finally, taking the time to save up several thousand dollars is a learning experience that is extremely valuable by itself. Knowing you are saving for a house means you are putting off immediate purchases and setting goals for yourself. This means you are able to see beyond the next paycheck and save it for something bigger than a short-term immediate want. Saving for down payment can also teach you cash flow, how to adjust to the ebb and flow of weekly/monthly bills. Earmarking funds from tax returns and other windfalls in the year towards your down payment amount can also go a long way to reaching your goal faster. Even better, learning to live below your means now means you will have a lot easier time adjusting to a new mortgage payment later on.
So, how can you find an extra $20K? How about keeping the car you have for a few more years and using that car payment money for your house fund instead. Or, try the 20th of the month method. When you are in the store and see something you just have to have, tell yourself you can come back for it on the 20th of the month (or pick your own date). That way, when the 20th rolls around, if you still really need it, you can give yourself permission to buy it. If you can’t remember what it was you wanted, you probably don’t need it in the first place. Or, try a personal loan to yourself. Set up an account to make set payments on a “loan” to yourself every month. Finally, set up an automatic savings deposit on your paycheck. If you don’t see the money, you won’t be able to spend it.
Remember, the people driving the flashy new cars and using the latest Ipads are paying a lot extra for borrowed time. Most do not have the cash on hand to pay for these things in full at the time of purchase, so they do payments. Affordable monthly payments are great, but when you’re done paying it off, is the item worth it? At the end of the day, having a roof over your head will be a safe bet, every time.