6 Ways To Save Money To Buy A Home

Buying your first home is a milestone in most anyone’s life. One of the obstacles that you might face, however, is getting the money together for that all-important down payment. So let’s talk about ways to save or acquire that money.

First, though, think about how much money you will need. If you are looking at an FHA loan, then the minimum down payment required is 3 1/2 percent of the purchase price and with a conventional loan you will be required to have at least (at least!) 5 percent down.

Ways to save up for a down payment

• Roth IRA – You might be surprised to learn that you can withdraw money without penalty from your no fee Roth IRA for the purpose of financing a home if you are a first time home buyer. The restrictions are that the money has to be in the IRA account for at least 5 years previous to withdrawing it, and there is a $10,000 limit. If you don’t have a Roth IRA, well, now is always a good time to start one.
• Start a “hands off” account – This one is easy – start a savings account, preferably a high-yield one, for your down payment money. Deduct a set amount per paycheck and have it automatically deposited so you don’t ever see the money.
• Frugality – Stop going to Starbucks and sell the Escalade! Or at the very least buy coffee instead of the Venti extra shot Soy Chai Latte and downsize to a Scion XB.
• Increase your income – Although this option may take awhile to pan out, you can try the following: go for a promotion or raise, ask for overtime if you are an hourly worker, get a second job or start a side business.
• Invest – Along with starting your down payment savings account, you can also put some of your money into a Certificate of Deposit (CD). CDs have a higher interest rate than savings accounts, although you have to leave your money in for a specified time like 6 months or a year. You can also try investing in some short term stocks if you feel knowledgeable about that type of investing.
• Tax returns and gifts – If you get a tax return each year, that money can go into your down payment savings account. The same is true for cash gifts for a birthday, graduation or anniversary.

Although saving money seems difficult, if you break it up and save over time you can reach your goal. If you follow some or all these suggestions, you should be well on the way to buying your first home.