If you intend on buying a house, chances are you would have thought about how to save up for a down payment. The money you have to spend on home loan down payment is quite a large sum. Hence the sooner you start to save the better. The number of years you would have to spend saving depends on how much you earn. For instance if you are in the lower income group, the number of years you would have to spend saving will be much higher compared to those in the middle or high income group. Now procuring money is not an easy task, but with a little financial discipline you can go a long way. In this article we will look at the different ways you can save for a home loan down payment.
The first thing you would need to create is a budget. List down your earnings and expenses and consider how much you are able to save each month. You may be required to alter your spending habits a little so that you will have more in savings. Have a look at your credit report to see where you stand financially. If you have any pending debts listed in the credit report, make sure to pay them off. Otherwise you will find yourself in a tight situation and unable to save enough for your down payment. Not only does viewing your credit report help in creating a budget, your credit report will also tell you what lending institutions see when they go through your records. If your credit report is free of any negative comments and have a good credit score, you have higher chances of getting your loan application approved.
Once you have created a budget, it is time to start saving. One of the ways most people resort to savings is having a portion of their earnings automatically transferred from their salary account into a savings account each month. If you receive a bonus, gift or a tax refund, you could transfer that as well to your savings account. Also, it helps to keep an emergency fund just in case. You could start one before you start to save for the down payment. Make sure to have sufficient amount in the emergency fund. By doing this you can be prepared for any emergency situation and your savings would not have to take a hit.
Look into the various investment options that will yield stable returns. It is advised that you refrain from risky investments, rather consider something in the lines of mutual funds or fixed deposits. Depending on the number of years you have to save, your options can vary from putting your money in high-yielding savings account to mutual funds. For investments such as stocks and bonds, your money can go up as well as down. So make sure to take into account all the risks involved in the various investment options, and only take a decision after careful consideration.
Every small step you take to save money matters in the long run. If you use credit cards for purchases then pick out those that come with lucrative offers. Most banks have discounts, rewards and cash back offers on their credit cards. When you are selecting a card, make sure to get one that will benefit you the most and bring down your expenditure. For example if you are a frequent flyer, look into the travel-centric credit cards where you can get fares on a discount. These small discounts and rewards you can avail from credit cards can help you save quite a big sum over a period of time.
Saving up for your down payment is necessary if you want to get a loan for the purchase of your dream home. Now if you have a poor credit score and your credit report is not very impressive, you could look into the bad credit home loan lenders in the market. Bad credit home loan lenders are those that are willing to extend funds to individuals with poor scores and not-so-impressive credit report. However, it is important to note that bad credit home loan lenders tend to charge higher interest and expensive down payments. So if you are planning to avail funds from bad credit home loan lenders, make sure you have larger savings. Instead of reaching out to bad credit loan lenders and paying more, it is recommended that you first work to improve your score and get any negative comments in your credit report cleared. Having a clear credit report can fetch you better home loan interest rates as well as spend less in down payment. But if you still want to avail funds from bad credit home loan lenders in the market, make sure to conduct your research and weigh all the pros and cons.
To summarize, there are numerous ways to save for home loan down payments. As you can see above, begin by first creating a budget to get an estimate of how much you will be able to save and in what timeframe. Open a savings account where the money will be transferred automatically for down payment. Look into the various low-risk investment options, and consider cards that come with lucrative offers. Only avail funds from bad credit home loan lenders when you have large savings and do not see other options.