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5 Ways To Reach That Elusive Home Down Payment

When mortgage rates are low, buying a home is not only a good investment, it can be the first step toward other purchases or a source of long-term rental income. Making this move for the first time can be an incredible experience, but many people are convinced that they can never afford the down payment. The amount seems out of reach, and credit card or student loan debt makes saving seem impossible. The good news is that there are several ways to come up with the money to put down on a home, while still leaving reasonable monthly mortgage payments.

Some of these methods take a little sacrifice, but keep a picture in your mind of signing on the dotted line, getting the keys, and taking those first steps into your new home.


PAY OFF CREDIT CARD DEBT

Obtaining and using credit cards help people build good credit, which is a key factor in getting a home loan. The problem arises when credit card debt becomes too high, and monthly payments go toward interest rather than the principal. Increase your monthly payments to your credit cards whenever possible to reduce the amount of interest you are paying each month. Put off any purchases on credit that aren't absolutely necessary. You may really want that new massaging recliner, but in the long run you will enjoy it a lot more in your new home rather than on your current credit card bill.

SAVE, SAVE, SAVE

This is where it's time to get creative. Find cheaper alternatives to things in your every day life, such as getting rid of cable and using streaming services to watch TV shows and movies. A $100 per month savings on your cable bill gives you an additional $6,000 over the course of five years. Put one-time payouts such as bonuses, tax returns and gifts into your down payment savings, or use them to pay off credit card or student loan debt to get interest payments down.

INCREASE YOUR SOURCES OF INCOME

It can be difficult to take time away from your family by getting a second job, but if your goal is to move your family into a place to call their own, even a few hours a week helps you reach your down payment goal. Don't be afraid to take advantage of your talents and skills and parley them into additional savings. Creating wood or other projects at home and selling them at yard sales or online is a great way to generate income while staying at home.

TAP INTO YOUR IRA OR 401(K)

Both traditional and Roth IRAs are good sources of money for securing a down payment, but make sure you are aware of any penalties and tax implications before you remove money from these accounts. You may also consider borrowing against your 401K, as any interest payments in this case go back into your investment account. As with IRA accounts, talk to a professional about the implications of borrowing against your plan to be sure you aren't hurting yourself in the long run.

INVEST CAREFULLY

Just as important as saving money for a down payment is what your do with it once you have it. Instead of leaving money in a savings account that doesn't generate interest, consider putting it into a series of CDs with different payout lengths. If your plan to save for a down payment is a long-term one, you might consider a high-yield savings account that is federally insured.


It is an exciting time to purchase a new home, as low interest rates mean lower monthly mortgage payments. You can then choose to pay at or above your mortgage to build equity in your new home, and use that equity down the the road to purchase another property. The purchase now may let you move your family from a starter house to the place they call home for decades, or give you a future rental income. With careful saving and investment, your dream property is within reach.