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Tips for Accumulating a Down Payment

 

Having some money to work with is always a good thing when you are making one of the largest purchases of your life!  It gives you option and having options saves you money.

  • Save - Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.
  • Borrow - Tap the 401k or even another asset.  Honestly I wouldn't recommend this for most buyer's, but you can get the down payment from your retirement plan.   Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.
  • Move - You may be able to save additional funds if you can move into less expensive housing.
  • Reduce - other higher interest rate debt. Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.
  • Sell some investments
  • Get a second job and save your earnings
  • Skip a year's vacation
  • Gift from Family - Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.

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