Competitor: This article comes from Jason at WorkSaveLive.com. See the original post Saving a Down Payment for a House.
Entry Category: Best Ways to Earn and Save Money
The end of May and throughout the month of June presented a lot of great changes for us.
My wife started her new job, we decided that we were going to sell our first house, and we had an influx of cash that certainly helped out our budget!
Considering that we’re attempting to sell our home, one of the things we immediately realized was that we were going to have to save a down payment for a house.
I’d like to tell you that we just had a pile of cash laying around for this sort of occasion, but unfortunately we have trouble “making it rain” and any savings that we have is already ear-marked for things such as:
- Emergency Fund Savings
- Car repairs, car replacement, house maintenance, annual life insurance premium, car insurance premium, and Christmas gifts
- Business marketing funds
So, after our monthly budget meeting in May we obviously determined that our primary financial focus was saving a down payment for a house.
For most people, saving a down payment for a house can be rather difficult. Depending on which mortgage company you go with, you could be expected to have a down payment between 0-20%!
In some areas of the country that may not be a lot, but if you’re talking about buying real estate on one of the coasts then a down payment could amount to TENS OF THOUSANDS of dollars!
Fortunately for my wife and I, we live in the Midwest and are looking at buying a home somewhere in the $130-160k range (so saving a down payment won’t be extraordinarily difficult). After a few discussions with various lenders we discovered that we need to have a down payment of 5% considering the current environment we’re in.
While I acknowledge that having a 20% down payment is ideal (solely to avoid PMI), we’re nowhere near having the ability to do that as our primary focus over the last 5 years has been to get out of debt. Therefore the majority of our disposable income has gone to those efforts.
How to Save a Down Payment For a House
In our particular scenario there are only a few ways for us to go about saving a down payment for a house, but for others reading this here are a few ways to go about it:
1. Save up cash with any disposable income you have.
2. Sell off non-qualified investments.
3. If you’re a first-time home buyer you can cash out your Roth IRA contributions, and/or you can cash out up to $10,000 of your Roth IRA earnings (penalty-free) as long as your account has been open for 5 years.
4. If you’re a first-time home buyer you can cash out 10% of your Traditional IRA without penalty. However, you will have to pay income taxes on that amount.
5. Use the equity in your existing home to put towards the down payment of the new home.
6. Take an extra job or sell things around the house
Some of these options may apply to you, some of them may not. For us particularly, we’re using a combination of a few options: (1) we’re taking all of our disposable income each month and setting it aside for the down payment, (2) we’re working overtime and generating some extra income, and (3) whatever we cannot save will come from the equity we have in the house we’re selling.
The Good & The Bad – Our Journey
So, if you’ve been following me for any length of time you’ve already witnessed the ups-and-downs that we’re apt to have. Fortunately for us, June was one of those UP months!
As my wife changed employers, she was able to cash out all of her PTO she had accumulated at the old job. Furthermore, she decided to stay on part-time at the previous job and work her regularly scheduled weekend shifts (she worked every 3rd weekend) on top of working the new, full-time gig!
To sweeten the pie even more, June was a month where she received an EXTRA paycheck! If you get paid every-other week then his happens to you too…twice a year.
It’s needless to say, we were pretty stoked with how things turned out for the month. When all was said and done, we were able to put over $3,000 towards saving a down payment for a house.
Despite all of the positives we did spend around $1,200 that wasn’t budgeted!! YIKES!
There was a lingering $250 medical bill that we finally received and we put quite a bit of money into getting our house ready to sell. We weren’t thrilled to spend the money, but we have done a poor job of decorating our house since we moved into it and it was in serious need of “homey” attributes.
Our house looks great now and we’re hoping the additions will help it sell a little faster and for a higher price than it would have otherwise.