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A Home Buyers Guide To Saving For A Down Payment
According to builder.com, first time home buyers in the United States take nearly eight years to save for a down payment for their dream home. The time frame is derived by factoring in the amount a renter pays for housing in each state and the required 10% down payment. Under this approach, buyers in a best case scenario take around 3.5 years to save for a down payment.
Another study by Realty Trac shows that it takes an average of 12.5 years for a new buyer in the United State to save for a 20% down payment. The study is based on a personal saving rate of 5.6% and the current home median home prices. Given that most first time home buyers are young adults with earnings below the national median salary, they would have to wait until they are 42 to afford a home.
However, the same savings can be made within two years in the Freddie Mac and Fannie Mae 3% down payment plan. Under this program, this option can reduce the time it take to save for a home to as little as one year to save for the down payment. The Freddie and Fannie plan is geared towards enabling first-time home buyers and low-income borrowers with little savings to afford the down payment.
To qualify for this program, you’ll need a credit rating above 625 and offer a full documentation of their assets, income, and job status. Also, the prospective first time home buyers must have a private mortgage insurance plan to qualify for the loan. Requirements can change, so Be sure to check with your local lender for specific current program requirements.
How a real estate agent can help
With the assistance of a real estate agent, first time home buyers can negotiate having the seller fully or partly cover the closing costs. Given their years of experience in the market, the real estate agents can identify hidden costs and advise on the best options for home financing. Click HERE for more good advice.
Here are some of the ways first time home buyers can boost their down payment savings.
Clear the credit card debt
For home buyers with credit card debt, making monthly interest payments on the debt and setting aside some funds for the down payment can be a hassle. Clearing any credit card debts will enable you to increase your saving portion and reduce the amount of time it takes to make the down payment.
Squeeze your budget
Keeping track of your spending habits will enable you minimize unnecessary spending and increase your savings. With a goal in your mind, you will be able to track your finances and increase the down payment savings.
Be aware of your priorities
Being aware of your priorities means being able to forego instant gratification for a more satisfying future reward. Saving for a down payment will require you to cut spending on your wants. If you are used to expensive vacations, you have them to let them go to be able to save for your down payment.
Creating an automatic saving account will ensure that you do not spend your down payment savings on other things. With an automatic saving account, a portion of your direct deposits will automatically be transferred to your saving account without missing.
With proper planning and consultation, first time home buyers will be able to maximize their opportunity and make down payments within the shortest time possible. Learning about the different the ways to boost your savings and getting professional help from a real estate agent, will enable you to attain your dream home within the shortest time possible. Before you jump into a home buying program, always ensure that you have enough information about the deal and other offers in the market.
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Already have your savings in hand? Click HERE to search for homes that meet your needs or if you'd like me to help you find a good lender.
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Dave Evensen - Broker Associate / REALTOR® - (303) 877-6775
Dave Evensen is a real estate agent servicing Denver, Littleton, Highlands Ranch, Lone Tree, Castle Rock and surrounding areas. Dave attended Metropolitan State College and the University of Northern....