How To Save For A Down Payment On A Short Sale

If you’ve dreamed of owning your own home, now may be one of the best times. You can find deals on foreclosures and short sale that are incredible, plus the mortgage interest rates are lower than they have been in years.

One thing that may be holding you back is coming up with a down payment. The amount you actually need to buy a short sale, bank owned, or whatever, does not depend on the type of sale it is but on the type of mortgage financing or loan you are using. With an FHA loan you need 3.5% minimum, for example. A USDA loan or VA loan could be lower. Of course, the larger down payment you can make, the smaller your mortgage payments and mortgage insurance will be, so saving up for as large a down payment as possible is to your advantage.

So how do you save up for a home down payment? Well, there are a lot of strategies for saving money. But let’s get down to basics. If you have an income, you need a budget. Write down everything you spend, and subtract it from what you make. (If your answer is a negative number, then you really have a problem – but keep reading because these tips will help you.)

Now that you’ve written your budget, there are some things you need to decide.

What can I do without?

  • If you eat out for lunch every day, for example, you are wasting a huge amount of money in a year. Try brown bagging four days a week, and treat yourself on Fridays. You might find you are eating healthier food and losing weight as part of the bargain.
  • If you buy expensive coffee drinks every day, you might try getting an espresso machine and making your drinks at home.
  • Save transportation costs by carpooling, riding the bus or train, or riding your bike.
  • Take a “stay-cation”. Find fun things to do close to home and skip the fancy cruise or big trip for a year or two while you are saving for your home.

How can I increase my income?

  • Basically, you can only save so much of the money you are bringing in. The rest has to go to paying essential bills. So one way to save more is to make more. Getting a raise or promotion may not always be possible, but you could take on a second job or start a side business. These could be temporary measures until you reach your financial goals.

How can I reduce my debt?

  • Now that you have some extra money from all the saving you’ve been doing, see if there are ways you can pay down any debt you may have. High interest credit cards eat up your money fast. Your goal is to pay them off completely and then continue paying them off monthly. Until you can pay them off, make sure you are avoiding extra fees by paying on time. This helps your credit score as well.
  • Think about paying off your car as soon as possible. Plan on keeping your car longer and just getting it repaired instead of trading it in. Repairing a car that is paid off is always less expensive than having a car payment.

What are some other sources of money?

  • You can use your tax returns to add to your savings account.
  • Use cash gifts you may receive, such as for birthdays, graduations, or anniversaries to help you reach your goals.

By now, you should be a savings pro. Just make sure you are putting all that extra money into a savings account or Certificate of Deposit. Soon you will have enough money to buy that short sale home you’ve been dreaming of.