If you will be purchasing a home soon in San Diego, you will need to save up for your down payment. If this is your first time buying a home, you might believe that a 20% down payment is necessary. But you can buy a home with a much lower down payment, sometimes even just 3% or 3.5%, depending on your qualifications and the type of mortgage you are considering.
Nevertheless, if your finances don’t have a lot of liquidity, even gathering the funds for a smaller down payment might stretch your finances a little bit.
Plus, you might be hoping you can make a larger down payment in order to reduce your interest rate or avoid paying for mortgage insurance, even if you qualify to make a lower down payment.
So, how can you save up money for your down payment, especially if you don’t have a lot of time? Here are a few ideas for gathering funds.
Tips To Save Your Down Payment
If You Have Some Time …
- See if you can cut your expenses. If it has been a while since you have revisited your bills, things may have changed. For example, there might be a more affordable cable plan than the one you currently have. If you are able to reduce several of your monthly bills and you are purchasing a home later this year, that could add up to significant money to put toward your down payment.
- Work overtime. Can you do some extra hours at the office, or maybe work some side gigs? These can also be great ways to put more money toward your down payment.
- Put any extra money you make or receive immediately into your down payment savings fund. Between now and the time when you take out your mortgage, consider socking away any extra money that comes into your life—for example, gifts, bonuses, etc.
- Pay off high interest debts or consolidate them. Do you have high interest debts? If so, you probably are bleeding unnecessary cash that you could instead be saving toward your down payment. If it is possible to pay off any of those expensive debts and still meet your down payment savings goal, do so—it will also improve your DTI ratio and potentially your credit score, both of which will also help you qualify for a more competitive mortgage. If you cannot pay them off, see if you can consolidate them into a lower interest loan. Then, put the savings toward your down payment.
If You Are Buying Your Home Very Soon …
- Sell an investment. If you have an investment you would be okay parting with at a profit right now, this could be a good time to do it. Of course, you will need to evaluate whether it is likely that doing so to invest the money in your home will be more profitable than leaving the current investment to grow.
- Check if you can pull from your 401(k). You may be able to dip into your 401(k) without incurring a penalty if you are doing it specifically for this purpose.
- Use gift money from a friend or relative. You might be able to put gift money toward your down payment. Check to see whether this is an option.
Even if you are unable to save up as much as you might like using these methods, there are still other options. A program like the Down Payment Assistance (DPA) Advantage program can help by providing eligible homebuyers with a grant of up to 3.5% of the home’s purchase price. In some cases, that might be enough to cover your full down payment amount. There is no repayment requirement for this grant.
Apply For Home Mortgage at Community Mortgage
During your consultation, we can tell you more about down payment assistance programs like this one and offer you other suggestions for how you can raise more money for your down payment quickly if you are buying a home in the near future.
To get started, please call us today at (619) 692-3630 to schedule your consultation. We look forward to helping you move into your San Diego home with an affordable down payment.