Millennial Corner: Breaking Rent – Saving Enough Scratch For a Down Payment

financial-edSometimes this whole adulting thing is not fun. We all couldn’t wait to move out of our parents’ house so we could be “grown-ups” with a place of our own. Then reality smacks us in the face when we see how our paycheck stacks up against the cost of buying a home. Many of us now find ourselves stuck in the “have to rent, can’t afford to buy” cycle. We know home ownership is a solid financial decision, but getting together enough cash for the 20 percent down payment seems nearly impossible.

It’s actually possible
Even if there seems to be more month left than your paycheck, there are ways you can start saving for a down payment right now. It’s not easy, and won’t happen overnight, but I’ve found few goals worth going for seldom are.

Let’s get down to basics.

Assume nothing. Some lenders don’t require the full 20 percent down payment, and others offer 100 percent financing options, especially if you are a first-time homebuyer and have stellar credit. If you’re a veteran, you may not need a down payment at all. So, instead of assuming that you have to put down 20 percent, speak to your lender first so you know exactly where you stand and how much you need to save.

Save in a special account. Next, take a look at what you’re currently spending money on. Sure, bills like rent and utilities are set costs. But how about the lunches you eat out at work every day? Or the movie channels you pay for and never have time to watch? Figure out what you can live without and instead put that money in a special dedicated savings account.

Put your savings on automatic. Saving can be painless when you establish an automatic withdrawal that pulls money monthly, twice monthly or weekly from your savings account. Also, commit to saving every tax refund, cash gift, and work bonus in your down payment account. If you get a raise at work, pretend it never happened. Live the same you were living before the raise, and put the difference between your old and new paycheck automatically into your savings account.

Get a part-time gig. Everyone has a side hustle these days, and many are things you can even do online from your couch. Even if you only put in a few extra hours a week, the additional cash flow can really help build your savings. BONUS TIP: If you’re in the market for some extra work hours consider a position at your credit union.

Ask the ‘rents for help. Let your parents know that you’re saving to buy a home. In certain circumstances, gift funds are allowable. They may even be willing to help put money towards the down payment. Just be aware that these “gifts” do have certain rules that differ by lender.

References: Money Talks News, USA TODAY, Zillow, MoneyPeach