Experts agree that 20% of a home’s purchase price should be a substantial down payment, but that can be a challenging number to come up with at closing. Here, the team at TexasLending.com offers advice for those planning to purchase their piece of the American Dream.
1. Start saving early.
According to TexasLending.com, it’s never too early to plan ahead. Even if your home ownership plans won’t begin to form for another decade or so, you can take available cash and invest it now. A diverse stock portfolio – about 50% stocks and 50% bonds – can help reduce the risk of loss while earning a tidy return.
2. Rent small or farther from the city.
Young adults and singles often don’t need a ton of space, so renting a smaller-than-ideal apartment might help free up more cash for savings. Likewise, TexasLending.com reports that apartments outside of the city center are often less pricey than their more commuter-friendly counterparts.
3. Consider CDs.
CDs (Certificates of Deposit) are a type of savings accounts that offer a higher interest rate, says TexasLending.com. The drawback here is the money must be left untouched for a longer period of time – often three years – before earning a dime. Those with three to five years before house hunting can stagger CD maturity dates to take advantage of different interest rates while having access to some cash earlier, if needed.
4. Find a freelance gig.
Side jobs can net a home buying hopeful some serious cash for the down payment. There is an almost unlimited amount of freelance work that can be done from home or outside of normal business hours. TexasLending.com reports that many people choose to sell crafts, clean homes, write blog posts, tutor school-aged children, or otherwise utilize their talents for profit. A few hours a week could mean $200 or more per month toward that 20%. Don’t forget to keep extra cash aside for taxes, which can be 30% or more on 1099 wages.
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