For many renters, saving a down payment is truly one of the greatest obstacles to making the move to home ownership. As rent payments continue to go up in response to low inventories and high demand, renters find themselves unable to meet their savings goals and still accommodate a growing family or other goals. Thus, renters need some creative options to reach their goals.
Here are a few of the options that can help you to reach your down payment goals:
One of the first ways is to reduce your highest expense, which is the rent. If you have been a good tenant, consider trying to negotiate a reduction. If your landlord is not willing to work with you in this regard, it might be worthwhile to downsize your space and your rent. The difference between these two rents can be transferred into your savings account on a monthly basis. When added with your regular contribution, the larger monthly deposit will help you reach your goal sooner.
Reducing your monthly expenses is another way to see an increase in your savings account. Look at large monthly expenses, such as car payments, cell phones and insurance, for potential savings. Renegotiating these expenses can provide additional funds for your savings. This is also an opportunity to make reductions in your discretionary spending. By setting short term saving goals, you can quickly achieve that necessary down payment.
Be willing to explore the option of cashing out a portion of your IRA. Some plans will allow you to do a cash withdrawal for a home purchase without penalty, thus adding additional cash to your savings account. However, not all plans allow for these withdrawals or there may be other deciding factors to consider before using this option.
Another possibility is state and federal programs for first time homebuyers. While the qualifications differ with each program, they might be worth exploring because many offer down payment assistance or opportunities to reduce the amount of the down payment by means of special mortgage insurance.
Also consider refinancing debt where possible to reduce the monthly payments on outstanding credit card or student loan debt. With student loan debt, you may also be able to switch to a different repayment plan, especially for government backed loans. The resulting monthly savings can be put toward your down payment.
Now we come to increasing your income. After all, it may not be possible to reduce expenses substantially enough to make a significant difference. Garage sales, freelancing work or other part-time opportunities can help bring in the necessary extra savings needed to assist you in reaching your goal. Plus the garage sale will reduce the amount of items to move later.
By tracking your progress to the goal, you can keep up your momentum. At the same time, remember that when your home purchase is completed, the money saved on a monthly basis will be worth the sacrifices made to reach that down payment goal.