7 Places Your 2013 Down Payment Might be Hiding
If buying a home is on your New Year’s Resolution list for 2013, know this: your
biggest challenge will almost certainly be coming up with your down payment and
closing costs.
Whether you’re trying to scrape by with 3.5 percent for
an FHA loan or you’re planning to put down a full 20 percent, saving for a down
payment might
be
the largest savings endeavor you ever undertake, after retirement
planning.
But
don’t let that daunt you. Look at it as more of a challenge or a game than a
slow-slogging deprivation-driven chore. In fact, I suggest that you add
something to your scrounging and saving: scavenging.
Finding your down payment money hidden
in resources
that are right in front of you can be a fruitful and fun angle
to
take
on an
otherwise overwhelming goal.
Use
this short list of oft-untapped down payment treasure troves to open your eyes
to funds that might be hidden in plain sight:
1.
Your budget’s biggest line items. I
like to get maximum bang for my buck. And I like to enjoy my life, too, so
depriving myself of little luxuries without getting much mileage toward my goal
is definitely low on my savings strategies list. But I’ve often found that if
you take your top 10 or so monthly expenses, there are almost always at least
one or two that you could slash significantly or totally do without, push come
to shove: all without feeling as deprived as you would if you cut your daily
coffee.
Home
buying is one of those push-meet-shove-type situations. If you’re serious about
coming up with your down payment funds, sit down during your holiday off-days,
and backtrack over your monthly budget (if you have one) or your last month’s
checking account statements. Isolate your top 10 budgetary line items and do an
internal gut check on whether there is anything on this list that you can slash
or eliminate.
If
this seems obvious or silly to you, don’t scoff before you give it a chance. I
have seen buyers do this exercise and decide to:
- move
home or to a cheaper place to eliminate rent - go
from two cars to one to eliminate a car payment - cancel
cable or switch cell phone service providers to get rid of a hundred bucks or
more every month,
fast-forward on their down payment savings and home buying plans by many months,
even years.
2.
Your bad habits. Have
you heard yourself say - out loud or internally - I’ve got to stop:
- smoking
- drinking
so much - eating
out so much - eating
so much junk - watching
so much TV - drinking
so many sugary coffee drinks - impulse
shopping - OSUI:
Online Shopping Under the Influence (it’s a real thing - I promise!)
or anything in that vein? Well, each of these are bad habits that cost. And
because they are often engaged in compulsively, they can cost much, much more
over time than you have any idea you’re actually spending.
Again,
far be it from me to suggest that someone who works hard every day shouldn’t
treat themselves to a coffee or lunch here or there. The fact is, if you deprive
yourself too severely, there’s a good chance your efforts to cut back and save
will be very short-lived, and possibly even backlash into binging behavior. But
if there’s a habit you’ve been wanting to change for health or other reasons
that also costs you a pretty penny, you might find it easier to make those
changes when you know you’re doing it in service of your vision of owning a
home.
So,
make a project of it. Figure out roughly what you’re spending on your bad habit,
and set up an automatic saving transfer from your checking account into your
down payment savings account. Then, get and leverage some habit-changing
resources, like those at ChangeAnything.com
or in one of my favorite books this year, The
Power of Habit: Why We Do What We Do in Life and Business.
Then, when you feel the compulsion to engage in your bad habit, come to Trulia
instead and peruse new listings in the price range and neighborhood of your own
target dream home - that will help you stay on track by staying mindful of
what’s really
important.
3.
Your stuff. When
you need to save money, there are really only two levers you can pull: you can
spend less, or you can make more. Selling stuff you have and don’t use or need
is a relatively painless way to make more money to go toward your down payment.
If you’re really serious about home buying, put everything on the table.
I’ve
known buyers-to-be who sold any and everything, including:
- cars
and motorcycles - clothes,
costumes, shoes and handbags - hobby-related
gear (bikes, tools and even costumes) - furniture
and antiques - and
electronics, CDs and even books (think: TVs, computers, old smart phones,
etc.)
fund their down payment and home buying-related debt elimination
plans.
Don’t
underestimate the amount of cash you can bring in from the stuff you already
own. Millions of home owners worldwide are now renting out rooms or floors of
their current homes for short periods of time on sites like Airbnb
and VRBO.
Sites like Getaround
and Zimride
allow you to rent out the extra seats in your car - or the whole vehicle, if
you’re not too faint of heart!
4.
Your skills and time. One
way to make more money, as discussed above, is to liquidate the things you have
lying around. Another way is to get to work! Spend your off-time, your evenings
and weekends leveraging your professional skills or personal hobbies to bring in
some extra cash. A friend of mine recently had a savings target she was trying
to reach and actually sent her whole circle of friends an email detailing (a)
what she was selling and (b) what sorts of projects she was willing to do to get
there - she earned well into the four figures, in less than a
month.
Maybe
you can sew or knit stuff to sell on Etsy,
grow things in your backyard to sell at the farmer’s market or, like one
enterprising Mom I know, use your baking and cake decorating skills to monetize
your kids’ classmates’ birthday parties. Or maybe you’re more interested in
cooking, house cleaning, babysitting or dog walking - in fact, another
acquaintance of mine has earned thousands
of “extra” dollars dog sitting while she works at home. If that sort of thing is
not up your alley, think about whether you can help people you know with their
small business projects, like research, bookkeeping or office organizing
projects.
Once
you get serious about coming up with your down payment cash and decide to be
creative about where to find that money, using your skills and your time
creatively is a power-packed way to open the financial floodgates. Consider
starting out with a simple email to your circle of acquaintances or by listing
your services on a site like TaskRabbit.
5.
Your loved ones. Some
folks are fortunate enough to have cash-flush loved ones who would love nothing
more than to help you have a home of your own. The best case scenario is to have
some idea of what sort of gift money you can count on as far in advance as
possible, as it will impact your own savings targets and
your lender’s documentation requirements. If you have a parent, sibling or
auntie who has mentioned their interest in giving you this sort of gift, it’s
not bizarre to bring the subject up, express your gratitude and let them know
that you’re planning to buy in 2013 so you can have a detailed conversation
about logistics - including their financial, tax or estate planning pros, if it
makes sense.
Alternatively,
if your home buying plans are timed alongside your wedding plans, graduation
plans or new baby due date, consider opening a down payment registry, so
well-wishers can funnel their gift funds right into your real estate savings.
For example, the federal Dpeartment of Housing and Urban Development (HUD)
allows small gifts to be combined in a single savings account and eliminates
otherwise onerous gift money documentation requirements with the FHA Bridal
Registry program, which is available around weddings and “other legitimate
occasions where substantial gifts are typically received by an individual or
individuals.”
Touch
base with your lender and agent to see whether there are any registry programs
that might make sense for your situation.
Finally,
buyers who decide to team up with their BFFs, siblings, parents or other loved
ones to buy a place they can jointly own and/or live in might be able to
structure things so that they have to come up with less down payment money than
they would otherwise - the co-buyer comes up with the rest! Think about whether
this sort of arrangement might help you and
your loved one accomplish your respective financial and real estate goals, in
one fell swoop.
6.
Your employer. Believe
it or not, some employers actually offer down payment and other forms of
mortgage assistance to employees. In particular, universities and governmental
agencies that employ first responders who are required to live locally for their
jobs (e.g., police, fire and other emergency personnel) often have housing
assistance programs that can include down payment funds or access to mortgage
programs with lower down payment requirements.
Even
if you don’t work for one of these sorts of agencies, if you are relocating for
work, touch base with your HR department to find out whether there are any
relocation benefits that can help you make up the difference between the cash
you have and the down payment you need to make your move.
7.
Your city, county or state. What
you’ve heard is true: there are few, if any, down payment assistance programs
still available on a national level. But many states, counties and cities offer
their own down payment assistance programs, which are generally available to
folks falling into one or more of the following categories:
- first-time
buyers (people who haven’t owned a home in the area in the last 3 years) - buyers
in low- or moderate-income brackets - or
those buying homes in a particular part of town.
Your
mortgage pro and real estate agent should be able to help you track down any
such local programs applicable to you. In fact, this is one great reason to
touch base with them at the beginning
of your down payment savings adventure versus waiting until the end. But make
sure you read up on the programs extensively before you decide to opt into one.
Many of them run out of cash over the course of the year, so shouldn’t be
counted on; others may require you to repay any assistance received if and when
you sell or move - things you should keep in mind at the outset.
3 Month Loan Direct Lenders are designed so that tenants and non homeowners can also have the opportunity to rejoice in the loan agreement.
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