Most people dream of one day purchasing a home which requires a down payment. Strategizing now about how best to achieve homeownership will make the process that much easier when it is time to buy. Committing to a well-organized and detailed financial plan will help you achieve your objective and keep you focused throughout the journey.

Determine your Down Payment Amount

The first step of the plan is to determine the end result. This means you need to know what your home purchase budget is. This number may change over time, but it is important to get an idea upfront.

Although there are free online mortgage calculators, it is always best to get a personalized evaluation taking into consideration the totality of the circumstances. We are of course happy to put together a comprehensive plan for our clients, free of charge.

Develop a Few Different Approaches

At times, it may seem like saving for a down payment could take a lifetime. It does not have to be so intimidating. Put multiple strategies to work at once.

• Start strong – Sticking to a structured and consistent savings plan is critical. However, to achieve your goal a bit faster, using money to make money will also keep morale high for future saving.
• Automatic set aside – Figure out the best way to put away a portion of your paycheck each month to a special down payment account fund. This way you never see the money, ensuring that you can’t spend it somewhere else and don’t really even know what you’re missing. Before long, you’ll be pleasantly surprised with how much you’ve accumulated.
• Save all extra income – whether you receive additional income from bonuses, raises, stock dividends, inheritance, or otherwise – immediately put this money into your down payment account to see significant rapid results.
• Keep paying – If during the course of saving, you pay off your car or other financed possessions – continue to pay the same amount each month to your down payment account. You likely won’t miss the money as you’ve already budgeted for daily expenses. You could significantly increase your savings by dumping in substantial monthly payments to your down payment account.
• Earn more money – whether this is in the form of a second job or a skilled hobby – look for ways to make more money outside of your day job. Look to put most, if not all, this money in your down payment account.
• Sell personal property– with websites like Craigslist, eBay and even local Facebook groups, selling belongings could be a great way to make a little extra money while tidying up the house.

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Put your Savings to Work

Putting your money to work is a great way to reach your down payment goal faster. It is important to talk with a financial advisor about the risks involved with certain investments, but doing something, even if it is very little interest in a bank account, is better than stashing the funds under the mattress.

Stocks & Bonds – Depending on when you plan to buy, this may not be the best option. Typically, stocks and bonds are longer-term investment vehicles using time to earn a steady rate of return. However, with the right direction, this arena is likely your best bet for growing your money especially in today’s market. Always keep in mind nothing is guaranteed and the market can quickly change direction.

Money Market Account – Your local bank likely offers a money market account with a slightly higher interest rate than the ordinary savings account. There may also be a limit on the amount of transfer you can place from this account. This would force you to leave your money alone.

Certificate of Deposit – A certificate of deposit has a higher interest rate than a money market account or savings account. A certificate of deposit requires you to leave money untouched for a specific amount of time. A longer duration yields a higher interest rate.

High Yield Savings – In today’s market there really is no such thing as a high yield savings account. Interest accrued in bank accounts is very little, however, anything is better than nothing.

Know your Financing Options

Lastly, you should learn about all available financing options so you can focus on the best course of action based on your situation. Many people are surprised to find out that there are routes requiring little to no money down. It is never too early to consult a broker or mortgage lender about loan options.

Depending on your specific situation, it may better to put less money down and have a higher payment, or it may make sense to put more money down and handle a smaller monthly payment. This should all be discussed in the early stages of your savings and home buying process. You need to know where you are going before you can plan for how to get there!

Money Crashers

Michael J. Libutti is a Broker and Attorney at Class Realty Group’s San Diego office. Reach him by email at mlibutti@classrealtygroup.com or by phone at 858-220-4295.