The Down Payment

Do you know what the biggest barrier to homeownership is? I bet you do. It’s the down payment.

Show me a person with a great job, and a great credit score. The best possible candidate for a mortgage, and a house. But – without that down payment, they’ll have no choice – but to rent.

And the fact is many home buyers believe you need a full 20% of the purchase price for a down payment. But that’s not the case. Because in today’s market you can get a high-quality mortgage for as little as 3% down.


So, let’s crunch the numbers.

If you want to buy a house for $300,000, a 20% down payment would be $60,000. Yep that’s six – zero. Add in around 3% for closing costs? That’s another nine grand… So in all using a 20% down payment you need nearly $80,000 but again that’s what people think they need. The fact is it’s much less than that.

With a 3% down payment, and 3% for closing costs you’ll need just under 20-grand to buy that same house.

I know $20,000 is a lot of money. But it’s a lot more achievable, then $80,000.

Now how do you come up with it?

First – start saving. I know, it’s a lot. But experts say if you don’t see the money, you’ll save the money – faster. So have your employer do a direct deposit to a savings account – that you can’t get to very easily. You might be surprised how fast it adds up.

Another excellent way to save? Try doing a ‘no spend’ month. Promise yourself that for one month, it’s food, rent and utilities ONLY. No other spending – at all. No movies, no restaurants, no new clothes, nothing. Lots of people do it – because it’s a great way to save big, and save fast.

Also, Bankrate suggests paying down your credit cards, too. Having fewer payments will let you save faster, and when you apply for a mortgage, you’ll be better qualified if you have less outstanding credit.

Next, if your parents can help, go for it. Millions of homeowners got their start by the generosity of their parents. But – if they give you money – they have to really give it to you. NOT loan it to you. In fact, they’ll have to sign a gift letter, saying you do not have to pay it back.

Finally, your community might help, too. Many areas around the country offer down payment assistance. You’ll have to qualify…

Again, the down payment can be a lot of money. But remember, it’s used to help pay for the house…and that money will represent how much equity you have. So it’s not really gone when you buy the place. You still have it. But instead of having it in cash, you have it in real estate.

So if you’re looking to buy a home, think about it. Sit down over a good cup of coffee and crunch the numbers. But oh – that’s coffee you make at home, NOT – at the coffeeshop! Cause after all, every little bit helps.

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