Ten Ways to Cover Your Down Payment

TRYING TO SAVE MONEY to buy a home is a challenge for people everywhere. Depending on the size of your household, and your paycheck, you can only stash away so much money on a consistent basis. It seems like every time you get a pay raise, there’s another bill that just got higher. Sometimes that bill is from your current landlord.And you just can’t wait to say goodbye to your landlord.

Lacking sufficient funds is also a dilemma for families who have outgrown their starter home and who need more cash to purchase a larger house, or one with more land. Those who are relocating to a new job might find homes much more expensive in the new area. Not only are these consumers faced with an affordability problem, but they will also have a mobility problem if they are unable to sell their current home quickly.

Prospective homebuyers have an array of Internet-based tools to explore homes for sale and monitor mortgage interest rates. Many consumers have learned how to navigate online pre-qualification tools and often discover that theycan afford their anticipated mortgage payment.

What’s holding them back from owning their own home is essentially one thing—cash. The critical question people ask is simply,“How much money do I really need?”

$200,000 Home Purchase Scenario

On average, homebuyers need at least $15,000 to buy a home at a sale price of $200,000. This estimate is based on a down payment of $10,000, representing 5% of the sale price, plus another $5,000 to cover closing costs and other expenses. For people who are able to save $100 per week, it will take about three years to reach a savings goal of $15,000. For many households, setting aside $100 per week is an impossibility, thus further delaying the prospects of homeownership.

According to Zillow Research,1 the average rate of appreciation for residential properties on a nationwide basis in 2018 was 7.6%. Each year that future homebuyers spend trying to save for their down payment, home prices continue to rise. This chapter introduces ten unique ways to supplement your savings, and in many cases, cover the entire down payment.

The infographic,Types of Down Payment Assistance, distinguishes five types of programs generally associated with state housing finance agencie