Are you dreaming of owning your own home but finding the down payment to be a hurdle? You’re not alone. For many potential homeowners, saving for a down payment can seem like an insurmountable challenge. However, with a little creativity and determination, you can secure the down payment you need to make your homeownership dreams a reality. In this blog, we’ll explore some innovative ways to achieve that goal.
Select a Loan Program with a Lower Down Payment
Certain loan programs allow for a lower down payment than most conventional loans. 
Typically, with conventional loans, you will need between 10 and 20 percent of the home’s purchase price for the down payment. For instance, on a $250,000 home, you would need, at a minimum, $25,000 up to $50,000.
If you are finding it difficult to save up a large down payment, you should explore various first- time buyer programs, FHA loans, or VA loans. If you qualify for one of these programs, the down payment can be as little as 3 percent of the purchase price. On the $250,000 purchase price in our example, you would only need $7,500 if you were approved for a loan with a 3 percent down payment.
Although you do need to keep in mind, the lender will most likely require you to obtain private mortgage insurance (PMI), which is special insurance to safeguard you and the lender. PMI will add to your total monthly mortgage payment, so you will want to discuss how much more this will be with your Chicago mortgage broker to see if opting for a home loan with a lower down payment fits into your budget.
Open a Savings Account
A great way to start setting aside money for a down payment is to open an interest-bearing savings account. As you save, you will earn interest on the money to further help grow your down payment. Make it a habit to set aside as much money as you can each pay period and avoid dipping into these funds unless it is an absolute emergency.
Downsize Before You Upgrade to Your Own Home
For renters, moving into a smaller apartment often translates to lower rent. Even though you might feel cramped or find you have to stack boxes in the corner because you do not have room to unpack everything, remember—your long-term goal is saving up a down payment and buying your own home. Sacrificing on space now for a short period of time will pay off later.
Budget Smartly and Cut Unnecessary Expenses
Start by taking a close look at your monthly expenses. Create a budget that allows you to save more money by cutting back on non-essential spending. By making small sacrifices in your daily life, you can accumulate savings over time. Consider cooking at home more often, reducing subscription services, or finding cheaper alternatives for your hobbies.
Additional Read: Tax Relief Tips for Homeowners
Reduce Cost of Living
You want to buy a home so that you can live the life that you’ve wanted for years. That may mean reducing the level of your lifestyle for just a few years so you can put that money away for a down payment. Look for a rental that is less expensive, even if it costs just a hundred dollars less than you pay now. Keep in mind that the smaller a home is, the easier it is to heat and cool, so you aren’t just saving on rent, but utilities as well. Figure out what you are paying now and, when you move, put the excess funds in an account just for the purpose of saving for a down payment.
Minimize Home Efforts
Yes, you want your current home to look nice, but the fact of the matter is that once you buy a home, you are going to do everything different. That décor collection that might look fantastic in your rental may not look so great in the home you buy. Everything in a rental is temporary, so consider putting more money into your savings and less into your current home’s décor.
Side Hustles and Gig Economy Work
Consider taking on a part-time job or participating in the gig economy to earn extra income specifically earmarked for your down payment fund. Popular gig jobs include freelancing, ride-sharing, pet-sitting, or online tutoring. Every extra dollar counts!
Use Windfalls Wisely
Put any unexpected windfalls, such as tax refunds, work bonuses, or gifts, directly into your down payment fund. These lump sums can provide a significant boost to your savings.
Leverage Financial Gifts
If you’re fortunate enough to have generous family members, they may be willing to gift you money to put towards your down payment. Be sure to check with your mortgage lender about any specific guidelines for using gift funds.
Government Assistance Programs
Investigate government programs or grants aimed at helping first-time homebuyers. These programs can provide financial assistance or down payment grants to qualified individuals.
Employer Assistance
Some employers offer homeownership assistance programs or benefits. These may include down payment assistance, low-interest loans, or counseling services to help you navigate the home buying process. Check with your HR department to see if your company provides any such benefits.
Additional Read: The Welcome Home Illinois Loan Program
Rent Out a Room or Property
If you have extra space in your home, consider renting it out to generate additional income. You could also explore platforms like Airbnb to rent out a room or property on a short-term basis.
Maintain a Frugal Lifestyle
Many people adjust their lifestyle when they get a raise at work, or when they come across a financial windfall, like a tax return or an inheritance. Instead of changing your lifestyle, just keep living the way you have been. After all, it’s gotten you through life so far, hasn’t it? If you do happen to come across a bit of extra cash, just put it away in your savings account. You can even celebrate a bit with an extra dinner out that week, but put everything else away.
Down Payment Assistance Programs
Research local and national down payment assistance programs, which can offer grants or low-interest loans to help cover your down payment.
Matched Savings Programs
Some financial institutions and nonprofit organizations offer matched savings programs, where they match a portion of your savings toward a specific goal, such as a down payment.
Remember, the journey to homeownership can be a marathon, not a sprint. Be patient, stay committed to your savings plan, and explore these creative avenues to secure your down payment. With determination and the right strategies, you’ll be well on your way to unlocking the door to your new home. If you have any questions or need guidance on the home buying process, don’t hesitate to reach out to us. We’re here to help you achieve your homeownership goals!
Additional Read: 11 Top Home Buying Tips
