Purchasing a home to live in is often a smart move for the young investor. I often see challenges faced by first time home buyers in coming up with the down payment to actually be able to purchase a property. Fortunately, saving up the money yourself is just one of the many options you have.
Here is a short list of acceptable funds for purchasing a home with a minimum down payment:
- Saving or Checking
- Cash saved
- Retirement Accounts
- Savings Bonds
- Thrift savings plans
- Rent Credits
- Trade Equity
- Gifts (pooled funds, equity, grants from non-profit, wedding, etc.)
As you can see, saving money is just ONE of the ways to purchase a property.The toughest thing to do for the young investor is to save up enough money for the down payment on a place to call home. It’s often difficult because as you begin your career and earning a higher income (as compared to your college “jobs”), you’ll have a new found freedom of the money that comes into your bank account.
My suggestion is to start guiding a portion of that money towards saving for that all important down payment. I suggest saving an additional 10% to get that down payment ready to go. So, on a $4,000/month salary, that’s $400 you’re saving for the down payment monthly.
From the list above, saving isn’t the only way to get into a property. The most common type of source of funds that I see from potential home buyers is the gift funds. Apply for down payment assistance through various grant programs, talk to your parents, pool money with friends, and get creative. The sooner you make the first purchase and have roommates paying your bills for you, the better off you’ll be financially.
Remember that as you’re saving for a down payment there are various programs that will help you get into a home with as little as 3% down payment (an FHA loan for example). Start small. Buy a condo. Buy a cheap house. Get the tax breaks and incentives that go along with paying a mortgage rather than just paying rent. For some benefits, see another article that I’ve posted here.
Happy House Hunting!