Advice

Identify and Stash: Saving For a Down Payment

We look forward to celebrating Homeownership Month each June here at the Home Builders Association! When it comes to affording a home, it’s essential to tackle one thing well ahead of time: the down payment.

By John Gunkelman. Gunkelman is current Home Builders Association of F-M president. He owns Dakota Construction of Fargo, Inc., specializing in custom homes, commercial remodeling and residential remodeling.

We look forward to celebrating Homeownership Month each June here at the Home Builders Association! When it comes to affording a home, it’s essential to tackle one thing well ahead of time: the down payment.

Even a modest down payment can be more money than many first-time buyers have ever put together in one place before. The median down payment for first-time buyers is around 7 percent. On a $200,000 house price, that comes to $14,000, or saving $1,167 each month for a year — so, for most people, accumulating that down payment would be a multi-year project.

One of the benefits of buying a home in North Dakota or Minnesota is that both states have great first-time homebuyer programs to make the burden of a down payment more achievable. Some of these programs can get you into a home for as little as $500 out-of-pocket, based on certain qualifications! Talk to your lender for more details.

In theory, saving for a down payment has two simple parts: identify money you can spare and stash it where it’ll stay put. Consider these suggestions:

  • Put your savings where it’s not in the mix of your regular spending money, like a separate savings account.
  • Cut back on frequent small luxuries like coffee-shop drinks. 
  • Make sure that savings go toward the down payment and don’t trickle out unnoticed in other incidental expenses or impulse purchases. For example, if you cut a daily $5 coffee expense, then every Sunday you can transfer $35 to your separate down payment savings account.
  • Analyze spending. Consider setting a budget for clothing or eating out. Check your credit card or bank withdrawals to get an idea of how much you spend eating out each month. Decide how much you’ll cut back and bank the savings.
  • Set up an automatic payday transfer. Choose an amount you can afford and have your bank automatically send that to savings.
  • Use a cash rewards credit card. Wait for the rewards to reach maximum dollars per point before you cash in and put the money in your down payment account.
  • Bank any windfalls — tax refunds, bonuses on the job or cash gifts. If you get a significant cash gift, you’re likely to need a letter for your mortgage lender confirming that it’s a gift and not a loan.
  • Consider moonlighting. Perhaps you could babysit, walk dogs, do yard work or even take a part-time job for a few hours a week — then stow those checks directly in your down payment account. 

Buying a home is a great long-term investment. The HBA of F-M has many members who can help you on your path to homeownership! From lenders to Realtors to builders, you can find them all at www.hbafm.com/FindAMember.

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