Down payments often scare buyers off – particularly first-time buyers. And most of it is because of that age-old “20 percent” myth.
You know it. That one that says you need at least 20 percent of the sales price for a down payment?
While sure, you’re welcome to put 20 percent down, for most loans, you don’t need to pay nearly that much. In fact, the most commonly used loans typically offer a 10 percent down option, while FHA offers 3.5 percent down.
Not sure how you’re going to save up for that down payment? Here are some nifty tips and tricks to help:
There’s an app for that.
Apps aren’t just for editing photos and sending GIFs to your best friend. They can also help you save. Digit, for example, calculates the exact amount of money you can afford to save based on your income and spending habits. Then, it withdraws small amounts from your checking account into your Digit account, where it adds up faster than you’d expect! It even offers a 1% bonus on your balance.
Acorns is another great app that can take those savings and invest them into a variety of money-earning portfolios based on your income level and goals. The app basically puts your money to work for you!
Determine what days of the month you’re most flush with cash – and how much of that cash you can stand to save. Then, set up automatic, recurring transfers from your checking account to your savings account in that exact amount. Do it bi-weekly if possible or monthly at the very least. To minimize any potential cash flow issues, shoot for scheduling the drafts just after payday.
Divvy out your paycheck.
Does your work offer direct deposit? Then head to HR and see if they can start issuing you two paychecks – one that’s deposited straight into checking and another into savings. Do the math and make sure they know just how much to put into each – and how often.
Round it off.
Forget piggy banks. Now, with Bank of America’s Keep the Change program, as well as others like it, you can round up your transactions to the nearest dollar and put that change directly into savings. An app called Qapital also offers round-off savings, as does Acorns, if investing your funds is more up your alley. All three offer a seamless, almost invisible way to save that won’t hurt your cash flow.
Cut the cord.
You’d be surprised at how much you can save just by cutting out cable for a few months. Invest in a $10 Netflix subscription, and funnel your $100 cable cash right into savings. After half of year, you’ve got an additional $600. If that’s invested with an app like Acorns, who knows how much it could be. You can do the same with other non-essential expenses, like Spotify or Apple Music subscriptions, your weekly Starbucks trips or your gym membership. Every little corner cut can help.
Help is Out There
You can also consider down payment assistance programs, which are available for buyers of all income levels and locations. Check with an Ethos Lending loan officer to see if you qualify for any special assistance programs today.
Want more advice? Ready to apply for your loan? Get in touch with one of our mortgage specialists to learn more.
Ethos Lending is a new type of mortgage lender. We use technology to keep our operational costs as low as possible. From closing costs to interest rates, we have made it our mission to make the process of buying a home more affordable.