Despite the state of the economy, the real estate market is still quite hot. Many Americans are still very interested in becoming homeowners, which means that the 2019 homeownership rate (which was 65.1%) could be poised to increase over the next few years. That said, the market will likely continue to be quite competitive — and that means it’s important for prospective buyers to strengthen their offers as much as possible.
One way to do that is by offering a larger down payment. While it was once possible to obtain a mortgage loan with only 5% or 10% down, lenders during the pandemic would prefer to approve loan applications from borrowers who are able to make a down payment of 20% or more. But, of course, being able to afford a more substantial down payment is no easy feat — especially when you have a family already. That said, it isn’t impossible. Here are just three ways your family can save up for a down payment on your future home.
Explore a Side Hustle
If you don’t have an opportunity to ask for a raise or seek a promotion at your current job (or if you stay home with your kids full-time), it might be worth exploring whether you should join the “gig economy.” Just about everyone has a side hustle these days — and while no one wants to glamorize ruining a hobby you enjoy with monetization, it can be a good way to bring in some extra cash. Plus, with more people working from home, remote side hustles are becoming more prevalent than ever. You could teach online or create a virtual course, take on some freelance work in your area of expertise, or make no-contact restaurant deliveries. Anything that’s relatively low-risk and that can allow you to create an additional income stream should be considered to ensure you have a bigger financial cushion later on.
Cut Out Extra Expenses
Nearly two-thirds of 40-somethings have less than $100,000 stashed away for retirement, with many others having virtually nothing saved for emergencies. If you’re looking to save for a house, you need to take a closer look at your budget and assess where you can cut back. Extra expenses like home entertainment, subscription services, and even non-essential food items may need to be eliminated for now. When grocery shopping, stick to your list and plan out expenses ahead of time. Talk to your kids about how you’ll have to find other ways to entertain yourselves over the next few months, as well; if you make them part of the conversation, you might be able to help demonstrate financial literacy early on in life for them.
Set Up Automatic Savings Transfers
Around 24% of home buyers still have student loan debt and it’s important to pay off as many debts as you can before you buy a home. But whether you’re paying off an existing loan or you’re saving up for a down payment, automating can make things a lot easier. There are apps or services you can use that will automatically deposit a certain amount from one account into another, allowing you to save without having to remember to make a manual transfer. You can set this up so it comes out of every paycheck or happens at a certain time each month. This can essentially trick you into thinking you have less money to work with, allowing you to make do with a smaller amount while still making progress toward your goal. As a side note, this can be a great way to save money toward your child’s education or help them save as they get older and establish their own financial goals.
Owning a home is a dream for many Americans, but it comes with a rather steep price. To make buyers present themselves as desirable as possible to lenders, it’s a good idea to make as large a down payment as possible. By using these ideas to grow your nest egg, you’ll present yourself better to lenders and will have a larger choice of homes at your disposal.