Here’s What It Will Take to Save Daily for a Decent Home Purchase

Buying a new home isn’t cheap, so it does take diligence to save for a down payment. How much diligence? Read on, eager homebuyer.
By Brian O'Connell ,

A good down payment is the gateway to your dream home, but getting the cash together can lean toward the nightmare side of the equation, as scores of would-be homebuyers are finding out these days.

While figures vary, depending on personal finance circumstances and individual credit scores, U.S. homebuyers can expect to pay 10% of the total purchase prices for a new home, to lock down that new home. Consequently, for a new home that costs $250,000, a buyer would need $25,000 as a down payment.

For most consumers, especially younger ones, that's a lot of shekels.

"Saving for a down payment can be difficult for prospective first-time homebuyers given the absence of substantial wage growth in recent years combined with the burden of student loan debt many are struggling under," says Daren Blomquist, senior vice president at RealtyTrac. "Even just a 3% down payment requires 14% of annual wages on average across the 513 counties we analyzed, and in 67 counties a 3% down payment requires more than one-fifth of annual wages."

If you qualify, down payment assistance can help. According to RealtyTrac, U.S. homebuyers using available down payment assistance programs can save, on average, "$5,965 on the down payment for a median-priced home, and an average savings of $11,801 on monthly house payments over the life of the loan."

But many Americans don't qualify for such programs, as they make too much annual income for substantial mortgage down payment insurance (find out for yourself at online sites like DownPaymentResources.com.)

If that's you, you're going to need to be diligent about saving - every day - for your new home down payment.

How much per day, you ask? Fair question, and a new report can provide some goals and guidelines.

According to recent data from Realtor.com, a buyer looking for a "median-priced home" in New York City, for example, would need to save, starting from scratch, $38.99 per day for five years to reach the needed $71,191 down payment on a $414,000 home.

Or how about sunny Los Angeles, where your daily savings amount stands at $67.95 for five years, for a $124,074 down payment on a $678,000 home. How in the name of Hollywood Boulevard would a home saver make that happen - every day (with no weekends off) for 1,825 straight days?

Financial gurus contacted by TheStreet have a few ideas.

"Pay yourself first," says Fred Schebesta, co-founder and chief executive officer of Finder.com, an Australia-based personal financial products and services comparison site. "One of the easiest ways to save money is to never see it first. Organize with your payroll or accountant to have a portion of your money immediately deposited into an account that's hard to access."

Definitely avoid taking on anymore debt, Schebesta states. "Small amounts of debt are unavoidable - like that bit of credit card debt that carries you over until payday, or a home loan for your main residence," Schebesta says. "However, in general, if you can avoid going deeper into debt, like taking that personal loan to go on a vacation, do so."

Schebesta advises mastering the 30-day rule. "The 30-day rule challenges you to wait 30 days before making a purchase," he says. "Often, you'll find if you wait a month to buy something, that urge will have dissipated by then and you'll save money. If you're on the fence about a purchase, waiting a while will give you a fresh perspective and will get you to question if that purchase is really worth the money."

Max out on technology, too, to make those daily cash savings deadlines.

Mobile apps developer Qapital, says accumulating funds for a down payment on a home is one of the most popular uses of its app, with about 5% of all users saving toward that goal. Qapital is clever, almost sneaky, but in a good way. For example, the app uses visual cues (like a photo of your dream home) to help users stay motivated along the way.

"Saving for a down payment on a home is a popular goal set by our users," says George Friedman, co-founder and chief executive officer of Qapital. "The ability to share goals is an attractive tool for aspiring homeowners, as it allows significant others to contribute to the same financial goal, without needing to jump into something as heavy as a joint bank account."

To use Qapital, download the app and set a savings goal. Then, create rules that trigger automatic transfers, such as charging yourself for guilty pleasures (like ordering takeout dinner), and transfer the amount owed from your checking account to your savings account to cover the cost.

Consumers looking for help on a home down payment should also contact their bank and check out the burgeoning number of down payment assistance programs offered by financial institutions.

"Many new homebuyers don't ask enough questions around down payments before creating their savings plan," says Kathy Cummings, a homeownership solutions education executive at Bank of America. "Others make assumptions that they won't qualify for assistance programs, and dismiss themselves from opportunities that are available to them."

Cummings points to her bank's Affordable Loan Solution program, created with Self-Help Ventures Fund and Freddie Mac. "It's a conforming loan that provides low- and moderate-income homebuyers access to a responsible lending product with counseling at affordable entry prices," she explains. "The program allows down payments as low as 3% on the purchase of a primary, single-family residence, with no reserve funds required in most situations for homebuyers who have demonstrated responsible use of credit in the past."

There are myriad ways to create a decent, daily down payment fund, and there are also opportunities to work with lenders to cut a deal on a low home down payment. You just have to want your dream house bad enough to go out there and get them.

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