May 23, 2019

4 Tips When Saving for a Home Down Payment

Saving money for anything — especially a down payment on a house — is the ultimate in adulting. It’s challenging, it’s daunting, and it’s definitely not fun.

But if you can save for a home down payment, you’ll be making one of the best investments of your life. And it’s more doable than you might think.

Ponying up a 20% down payment today is possible — even in major metropolitan areas. And while you don’t have to be a millionaire, you do need a plan.

4 Tips to Make Saving Easier:

Here are four ways to help get you into the home you want:

1. Figure out how much you need to save and establish your timeline.
Meet with a mortgage lender or broker to determine what you can qualify for, then find a financial adviser to help plot your strategy.

This calculator can help determine your down payment.

“You want to buy a home where your monthly mortgage payment is as low as possible and definitely less than 25% of your after-tax take home pay,” writes Grant Sabatier, author of “Financial Freedom,” in “3 Best Ways to Buy a Home in 2019.”

2. Make executive decisions.
One of the first things business leaders do when they need to improve the bottom line is to find ways to cut costs. Look for places in your budget where you can save and consider items you can live without.

For example, are you really using your gym membership? Are you getting the best rate on your car insurance? Try contacting your internet and cable providers to see if you qualify for discounts.

Embrace your inner executive and make the tough choices. But don’t deny yourself all your favorite treats, either. You can have your avocado toast and caramel macchiato and save money away, too. Get creative and find your savings elsewhere.

Any single change may not make a meaningful difference, but if you can identify several expenses to reduce or eliminate (especially monthly ones), it adds up over time.

3. Set up an automatic savings plan.
Commit to automatically depositing a percentage or dollar amount of every paycheck into a dedicated savings account. When you put savings on autopilot, you reduce the temptation to spend on other things.

4. Save your windfalls.
Who doesn’t want to splurge when bonuses, commission checks, tax returns and grandma’s birthday check arrive? But if you’re serious about saving, then you’ll earmark this extra dough for your down payment. (OK, go ahead and spend the birthday money. Well, some of it, anyway.)

When you need a jumpstart

Making a 20% down payment means avoiding the burden of private mortgage insurance (PMI) products, such as home equity lines of credit (HELOC). Not only will monthly payments be lower, but you also won’t be subjected to added debt, extra payments and fluctuating interest rates. Also, buying a home with a down payment below 20% is harder to finance, pushing interest rates higher.

But a 20% down payment is a lot of money, even in markets with relatively low median home prices.

Another option is what we call home co-investment. Home co-investment can help you crest that magic 20% peak. Put 5% or 10% down and Unison can invest the rest. Unison doesn’t charge you interest or monthly payments. When you sell your home, we’ll share in the profit if your home value increases, or we’ll share in the loss if your home value falls. To learn more about home co-investments, and the additional terms and conditions that apply, read more here.

We believe homeownership is one of the greatest financial decisions you can make. Our co-investment is just one important way of putting our money where our mouth is.

Adulting never looked so good.