If you’re planning to buy a home in the next few years, you might be thinking about saving for a down payment. That’s great! It can be a challenging process, but it’s also an exciting time — even more so when you aren’t going it alone and tackle it with a team mindset. In this post we’ll look at how to make your downpayment a team game and get some tips on how to go about doing so effectively.
Figure out your target with a loan officer.
You have a good sense of what you’re looking for in your new home. And for the right price, you can have all that and more. When it comes to price, it’s generally more important to look at affordability (the ability to cover the ongoing cost) over price (the purchase amount of the property). Affordability is driven by price, but also by rates and loan structure, so call in a teammate, your loan officer, to help you figure out the best option. With that determined, you’ll have your down payment target and can get to work.
Look at your budget and forecast what you can save.
With the goal in mind, look at your financial situation and determine for yourself how much you can contribute monthly. Now sit down and do the same exercise with your partner or a trusted, and preferably frugal, friend or family member. You will be surprised at how many opportunities you identify with the objectivity of a teammate.
Your best teammate may be sitting on the bench!
Did you invite the MVP to the game? If you haven’t at least explored down payment assistance programs, you may be missing out. There are government and private sector programs offering grants and loans (forgivable, low cost and no cost) to help first-time home buyers with closing costs and down payments. Better yet, many of these programs define anyone that hasn’t owned a home in the past three years (or five years in some cases) as a first-time buyer.
Your loan officer will be able to help you identify what’s available in your market. Make sure you ask the question and do your own supplemental research online.
And consider asking for help from friends or family.
Have you considered asking for a gift from a family member or close friend? No one cheers for the home team like family. You may be surprised that for more than 22% of first-time home buyers last year, the answer was “yes”. Consider asking for gifts of equity from family members or close friends. If a gift is out of reach, you can also benefit from an interest-free loan, just make sure to disclose it to your lender during the application process if you go this route.
Make your plan and share it with a teammate.
It’s a quirk of human nature that when you describe your goal to another person, you boost the likelihood of achieving it by 1.2 to 1.4 times. Add in the benefit of a partner helping to keep you accountable, providing moral support and encouragement, and you’re on your way.
As you can see, making your downpayment is a team game. You’ve got talent on your roster and a strong fan base rooting you on, now get out there and win one for the Gipper!
Next steps…
- Recruit your team.
- Identify an accountability partner amongst yor family or friends.
- Talk to your loan officer about down payment assistance programs and your eligibility.
- Read our blog about Giving and Receiving Gift Money for a Down Payment
