Establishing regular savings can become an insurmountable challenge for most people. But if you want to realize your home-buying dream, you must look for ways to save money for the down payment on the home located in your ideal neighborhood.
Contrary to what most people think, saving money for a down payment is not just about reducing your expenses and giving up luxuries. Instead, you need to understand the down payment requirements for the home you are looking to buy and prepare a budget to save money you need in a reasonable amount of time.
To turn this daunting task of saving money into something simpler and easier for you, I have compiled a list of tips that you can use to save money for the down payment of your new home in Atlanta.
1. Understand Down Payment Requirements
Down payment requirements vary from one home to another, but generally speaking, you are required to put down at least 20 percent of the purchase price as down payment. There are some specialized home loan programs, such as FHA loans, that require as little as 3.5 percent of the selling price. So, if you think you can’t cut down on your expenses, you may want to look for more flexible lending options.
2. Create a Budget
Once you have determined how much you need to save, you are ready to prepare a roadmap for accomplishing your goal. To prepare a budget, begin with a quick review of your savings account. If you have some money saved, deduct it from total down payment to figure out how much you actually need.
When preparing your budget, follow the 50-20-30 rule. The rule divides your income into three categories:
- 50 percent for necessities, such as food, rent, utilities, cost of transportation, etc.
- 20 percent for savings. This is the amount that will contribute to down payment.
- 30 percent for fun and entertainment, such as going to the movies, gym memberships, etc.
You should be able to save money for down payments quite easily if you follow this rule wholeheartedly. But the problem arises when the other two categories, particularly fun and entertainment, preempt the flow of money to your savings account. To avoid this, review your expenses and consider cutting down on those that are not absolutely necessary.
3. Seek Alternatives
If you think that you will not be able to achieve your objective in a reasonable amount of time or you want to move into your new home quickly due to any reason, you should consider alternatives. Here are a few options that you may consider to get the money you need for down payment:
- Borrow money from your family or friends
- Borrow from your 401k account
- Use the equity in your current home
While it may look like an unnecessary hassle to give up on things you love and save money for down payment, it is worth the effort. Homeownership saves you from paying rent and offers you greater freedom and flexibility.
If you are interested in learning more about buying a home in Atlanta, you may contact me on my website. To get more tips about home buying and selling, please visit my blogs on Luther Ragsdale.com and Platinum Real Estate.