COLORADO SPRINGS – It’s the American dream for some people to own a home, but making this dream a reality can be a huge financial hurdle.
Carl Carlson, CEO of Carlson Financial, explained what a smart down payment is and tips to help you save.
“How in the heck do we save this much money to really have a nice down payment?”
Houses aren’t getting cheaper and the amount of money needed for a solid down payment is only going up.
Carlson said, “The best situation is you would have 20 percent down when you purchase a home and that can be a lot of money…if that’s on a $250,000 house that’s $50,000 and it takes awhile to save that much money.”
Carlson suggests 20 percent down because doing so will save you from having to pay mortgage insurance which can add another $100 to $200 on monthly payments.
“First you need to sit down and just figure out…how much do we have to save to get to that point within the number of years that you want to get there?”
If you really crack down and stick to the plan the savings will build up.
“You should always automate your savings…anytime you get something, if you get a raise…take a big chunk of that percentage and save it for that down payment.”
Also consider cutting down on unnecessary expenses like eating out, buying new clothes, and entertainment. Another option, if you’re younger, is to use retirement funds.
“IRA’s will allow you and 401(k)s to take money out without any penalties if it’s for a first home time home purchase so $10,000 they’ll allow you to take $10,00 out per person.”
It’s a good chunk of change that could get you one step to closer to your dream home.
Carlson said if you really want to buy that home fast you can also look into FHA loans that sometimes only require a few thousand dollars for a down payment. If you’re with the VA a down payment could be even less.
Carlson Financial is a sponsor of Financial Focus.