save for down payment

10 Ways To Save For A Down Payment On A Home

Saving for a down payment is one of the major hurdles most first-time homebuyers face on their journey towards homeownership. However, with a clear savings goal, a solid savings plan, and adopting a few savings strategies, you’ll be well on your way to saving for your first home.

1 – Start with a clear savings goal

Start by calculating how much you will need for your down payment and closings costs. FinLocker users can use the Home Affordability calculator, which will estimate a total home budget based on your income, and display the minimum down payment for a Conventional (3%), FHA (3.5%) and VA (0%) home loan, and the estimated closing costs for each loan type.
The example scenarios below are based on a 30-year mortgage term at a 4.25% interest rate.

On a $75,000 annual income you could afford a $265,000 home with a Conventional loan

  • Monthly Payment: $1750.67
  • 3% Down Payment: $7,940.00
  • Est. Closing Costs: $10,587.00
  • Total to Save: $18,527.00

On a $75,000 annual income you could afford a $286,808 home with an FHA loan

  • Monthly Payment: $1937.03
  • 3.5% Down Payment: $10,038.00
  • Est. Closing Costs: $11,472.00
  • Total to Save: $21,510.00

On a $75,000 annual income you could afford a $411,506 home with a VA loan

  • Monthly Payment: $2530.59
  • 0% Down Payment: $00.00
  • Est. Closing Costs: $16,460.00
  • Total to Save: $16,460.00

2 – Create a household budget

1. Write down your bills and regular expenses.

Bills:
• Bills that are the same each month, like rent
• Bills that might change slightly each month, like utilities
• Bills you pay once or twice a year, like car insurance
• Minimum credit card or loan payments. Anything beyond the minimum goes into the savings and debt repayment category.

Regular Expenses
• Food
• Transportation or Gas
• Entertainment, Cable
• Clothes
• Unplanned expenses, like car repairs or medical bills
• Child care or other expenses you need so you can work.

2. Write down how much money you make after tax.
3. Subtract your bills and expenses from how much money you make
4. Review your budget to see what you do not need or how you could spend less.
5. At the start of each month, plan how you will spend the money you earn that month.
6. At the end of the month, see if you spent what you had planned.

3 – Avoid your spending triggers

While you were reviewing your bank account transactions, you may have noticed a few spending habits that you can adjust to find additional savings.
We all have those places or people that make us want to spend a little too much. Maybe it’s a discount department store or auto shop, or the need to upgrade your phone with each new release. Until you’re feeling confident with your budget, limit your contact with those triggers, so you can focus on what you’ve planned to spend in that category. Challenge yourself: Can you resist the temptation to upgrade your phone while you’re saving and working on improving your credit?

4 – Go on a 30-day spending diet

For one month, only make essential purchases: no new clothes, no take-out, no new gadgets or toys. Deposit the money you saved each week into your savings account. At the end of the month, see what areas you can maintain to keep your savings growing.

5 – Think before you shop

Buying something impulsively, can throw your budget out of whack. Instead, give yourself 24 hours before purchasing. You’ll typically wake up the next day a little less excited about that deal, which can help you feel confident about making future buying decisions rationally.

6 – Look for savings before you shop

If you regularly shop at certain stores, you probably know when they offer their best deals, so wait to shop then. Check out your supermarket’s weekly sales so you can plan your shopping list, and stock up on the sale items you regularly use. Save even more at the supermarket with coupons online or in the supermarket’s app.

7 – Adjust your insurance

If you only use your car for local trips, ask your auto insurance company if you can adjust your insurance coverage to save money on your monthly premiums. An independent insurance broker can also find other ways to save, such as increasing your deductible amounts or combining multiple policies with the same provider.

8 – Open a separate savings account

Reduce the temptation to spend the money you’ve been saving by stashing the money in a separate savings account. If you’ve noticed that you can regularly save $100 from each paycheck, ask your employer to set up an automatic deposit for a set amount from each paycheck into this account. Look for a financial institution that pays interest on the savings account.

Additional ways to reach your down payment goal

9 – Tips To Save Some Green While Making Make Your Home Greener
10 – Giving and Receiving Gift Money For A Down Payment

10 Ways To Prepare To Buy A Home

Nationwide, cities are low on inventory for starter homes, and this situation is expected to remain the same in 2021. It is important to get organized for your home purchase now, so you’ll be prepared to make an offer when you find the right home.

Many of these tips apply to current homeowners looking to upgrade to a larger home to raise their family or downsize for retirement, and those looking to make their first major purchase, such as a new car.

Review your credit score and credit report

FinLocker makes it easy to monitor your credit report by displaying your credit score on the Dashboard so you can easily see it every time you sign in. If you haven’t signed up for Credit, stop reading this article now, open your FinLocker app, and sign up – it only takes a few seconds – then resume reading this article.

Review each of your credit reports to ensure there are no errors. You can also obtain a free credit report from each of the three credit bureaus from AnnualCreditReport.com. Your mortgage lender will be reviewing your credit report as part of your loan application, so you don’t want any nasty surprises later. Reviewing your credit report now will give you plenty of time to correct any errors. FinLocker has advice on disputing credit report errors inside the app.

Credit scores range from 300 to 850, with a higher credit score indicating a lower credit risk. While a credit score of 720 and higher is generally considered good and will help you obtain a lower interest rate, you can qualify for a home loan with a lower credit score. FinLocker recommends homebuyers achieve at least a 640 credit score to apply for a home loan.

Save for your down payment and closing costs

If your goal is to buy a home in 2021, you’ve probably looked at the price of homes listed in your preferred neighborhoods. Use the FinLocker Home Affordability Calculator to calculate a realistic purchase price that you can afford. The calculator will also estimate your costs to close (your down payment and closing costs), which should be a separate savings Goal in your FinLocker.

Automate your savings

Open a separate savings account, ideally one that pays interest, to save for your down payment and closing costs. Set up a direct deposit through your company’s payroll or auto-transfer a set amount each paycheck if the savings account is with your current bank. Resist the temptation of getting a debit card for the savings account. If your savings account is less accessible, you are more likely to leave that account untouched.

Enroll your new savings account in your FinLocker to see the account balance grow.

Set alerts to pay your bills on time

One of the major contributing factors to your credit score is paying your bills on time. Your lender will want to see that you can pay your existing loans and bills on time before they finance your home purchase.

Sign up for email or text alerts for your credit cards, student loans, utilities, car loan, and other bills you pay regularly. Schedule payments to be deducted from your bank account after each paycheck is deposited to ensure your bills are paid on time. Some financial institutions or vendors may even give you a discount or a reduced interest rate for scheduling auto payments.

Calculate your debt-to-income ratio

Mortgage lenders want to be confident that you can afford to repay your home loan each month before they approve your loan application. One of the areas they review is your debt-to-income ratio (DTI). FinLocker makes it easier to monitor your DTI when you enroll in Credit and connect your bank accounts and loans. Use the FinLocker Spending Analysis to see where your paycheck is going and identify unnecessary spending that you can cut back or eliminate.

Monitor your spending

If your DTI is above 45%, you need to monitor your spending, stop relying on your credit cards to meet your expenses, and start living within your household budget.

FinLocker users can create a budget for their regular household expenses, receive notifications for staying on track, and alert when they’ve gone over budget each month.

Use the FinLocker Spending Analysis to see where you can make savings to start paying down your debts. Can you change your cable/internet plan to one with minimal service, or cut your cable subscription entirely and replace them with a couple of streaming services?

Don’t take on new debt

Don’t be tempted to open a credit card to purchase furniture for a home you haven’t bought. Opening new credit accounts, or being a co-borrower on a loan, may hurt your chances of getting a good mortgage rate. Even transferring a balance from a high-interest credit card to a card with an introductory 0% offer can negatively impact your credit score.

Improve your credit score by paying down the balance of your oldest credit card. Even after you’ve paid off the card, charge a manageable amount each month to keep the account active. Credit history has a moderate impact on your credit score, and lenders want to see that you have a history of being responsible with various types of credit.

Reduce clutter by selling unwanted stuff

Take an honest evaluation of the stuff you don’t use or need around your home. Challenge every family member to identify five items such as clothes, shoes, toys, sporting equipment, etc. that no longer fits or isn’t used. Identify the most appropriate selling apps, then take a photo of the item with your phone, post a description, and sell your items. Split the profit 50/50 for each item your kids donated, and use the remaining money to pay down debt or add to your savings account.

Keep selling until you’ve reduced your unwanted items. You’ll have reduced the clutter around your current home and made it easier to move when the time comes to buy your new home.

Start gathering your documentation

Whether you are buying your first home or selling a home and buying a new home, there is a basic set of documents that all mortgage lenders will require for your loan application. Start gathering the documents now, and upload them to be stored securely in the Document folders in your FinLocker. When the time come to apply for a loan, you’ll be able to select which documents to share with your lender, and transfer them securely for your loan application.

Income

  • Pay stubs covering the past two pay periods or 30 days
  • Leave and Earnings Statement (military)
  • Past two years’ W2s
  • Federal tax returns for the past 2 years, if you are self-employed, own a business, a commissioned employee (25% or higher), an employee with unreimbursed business expenses or real estate income.
  • Divorce decree and settlement paperwork for separate maintenance (if applicable)

Assets

  • Statements covering 60 days for checking and savings accounts, investment and retirement accounts. FinLocker users can transfer accounts connected in their locker to their lender for asset verification.
  • Information for real estate already owned (use, income, if it’s on the market, estimated value, mortgages)

Credit/Liabilities

  • An explanation for credit mishaps. Bankruptcy and discharge paperwork (if applicable)
  • Divorce decree and settlement paperwork for child or spousal support expenses (if applicable)
  • Documentation disproving any erroneous items on your credit report

Personal Documentation

  • Driver’s license
  • Social security number
  • Certificate of Eligibility (military)

Reconsider renewing your lease

If you are currently renting, review your lease for an “early termination” clause and compare any costs of changing to a month-to-month or six-month lease when the time comes to renew. If you love the home you currently rent, you could even make your landlord an offer to buy the property.

Tips To Save Some Green While Making Make Your Home Greener

Finding areas to save money in an already over-committed budget to put towards a down payment and closing costs is one of the biggest challenges for many first-time home buyers. Start implementing these energy-saving tips to see savings on your utility bills. Homeowners will also find these tips valuable to save for their next financial goal.

Lighten Your Energy Bill

  • Turn off unnecessary household lights. If you live in a multiple person household, consider installing an occupancy sensor that works by detecting a person’s presence by motion to switch the lights off automatically. The devices, which are inexpensive and easy to install, can cut your wasted electricity for lighting by 30%*.
  • Change your light bulbs to LED. While they cost a little more upfront, they will last longer, and they use less power.

Heat and Cool Your Home For Less

  • In most homes, your HVAC system is likely to consume the most energy of all of your appliances, accounting for 48% of the average home’s energy use. Adjust your HVAC thermostat. Depending on which part of the country you reside in, aim to set the thermostat for 85 degrees while you’re away from the house all day and 78 when you’re at home. In the winter, aim for around 68 degrees when you are home and 58 or less while you are out for several hours or sleeping. This adjustment will help save up to 10% on heating and cooling costs* for your home.
  • Turn the HVAC fan setting to Auto to stop the fan from working when the unit isn’t heating, or cooling will save an additional $15 to $25 per month.*
  • Clean registers and vent covers at the start of summer and winter, and shut registers in the rooms you don’t regularly use.

Reduce Power Consumption

Lower Water Heater Temperature

  • Reduce the temperature of your water heater thermostat to 120ºF (the default temperature is usually 140ºF ) can save $36 to $61 annually in standby heat loss and more than $400 from water use in your home*. The reduced temperature will also slow mineral buildup and corrosion in your water heater and pipes, and reduce the risk of running a scalding hot bath or tap.
  • Turn the thermostat down to its lowest setting or completely turn off the water heater when you go on vacation.
  • An on-demand or tankless water heater takes up less storage space and will deliver plenty of hot water to run a bath or take a long shower.

Efficiently Do Laundry

  • Washing and drying your clothes efficiently will help them last longer, saving money and reducing your energy consumption.
    A high-efficiency washing machine uses less cold water and less detergent if you use high efficiency (HE) laundry detergent for all loads. The next time you purchase a new washer, look for a HE ENERGY STAR model, which uses 35% less water and 20% less energy than standard washers**.
  • If you don’t have a high-efficiency washing machine, use cool water for laundry that isn’t very dirty. Save the hot water for things like kitchen towels.
  • Air dry your clothes to save power from using the dryer and help maintain your clothes’ shape.
  • Drying sheets and towels in the sun provides a sanitizing effect, in addition to saving power. If you can’t have a clothesline in your backyard or live in an apartment, place cloth on a folding drying rack outside.
  • If you must use the dryer, tossing a clean, dry towel in the dryer with your clothes will absorb moisture and speed the drying process. An ENERGY STAR certified dryer will use about 20% less energy than conventional models.

Insulate Your Home

  • Check your windows and doors for leaks. Check the window seals, and reseal if necessary. Caulk or add weatherstripping to provide a tighter seal.
  • Hang thermal curtains and insulating shades to hold the warmth in winter, and keep the cool air in summer. Open blinds and curtains during the day on the sunny side of the house to let the sun warm those rooms.
  • Insulate your water heater tank with an insulated jacket or blanket designed to help prevent the heat from escaping to reduce standby heat losses by 25%–45% and save about 7%–16% in water heating costs annually.*
  • Add more insulation to your attic or crawlspace. If your attic is easily accessible, spray foam insulation provides a better R-value than blow-in insulation. Rooms located above a garage can get cold from the drafty open space below, so insulate the garage ceiling, too.

* U.S. Department of Energy
** energystar.gov

10 Ways To Get Your Finances Back On Track After Holiday Season Spending

By now, your credit card bills are arriving, and you see just how much over your budget you went during the holidays. All is not lost! You can take back control of your finances and make a fresh financial start by implementing these simple and practical tips.

1- List your debts.

Before you can create a plan to pay off your debts, you first need to know how much you owe. Start by listing each debt or loan account (not just your credit cards), specify the total amount owed, the minimum payment, and the current interest rate for that debt.

2 – Pay more than the minimum on your credit card each month.

Credit card companies display the length of time to pay off your balance and the total amount of interest if you only make the minimum payment each month. The amount you saved on the holiday sales will be nullified if you only pay the minimum each month. Pay whatever extra you can, even if it’s $10 more towards your debt each month.

3 – Decide your spending goals.

Don’t be too hard on yourself if you went over budget during the holiday season. Make this a lesson learned and start the year by creating new financial goals to put your daily purchases in perspective.

Identify annual expenses such as back to school supplies, summer camp, and holiday shopping, and start saving now, so you’ve got money set aside to pay for these expenses when the time comes.

4 – Set alerts to pay your bills on time.

Credit card interest rates are high enough. Avoid missing payments, which is one of the contributing factors to your credit score, and paying exorbitant late fees by making at least the minimum payment before the due date each month. Sign up for text and email alerts to ensure you pay your credit cards, student loans, utilities, car loan, and other bills on time.

5 – Create a realistic household budget.

Learn what money is coming in and going out by connecting all of your bank accounts to your FinLocker. Create a budget for your known regular expenses, such as mortgage or rent payment, groceries, utilities, medical insurance, phone, internet and cable, gas/transportation to work, childcare, etc. Deduct the total of these expenses and payments for your debts from your household income. If you’re close to zero or get a negative number, take a second look at your non-essential expenses to see where you can save. You need to have money left from your household budget if you want to achieve any of your spending goals.

6 – Have a no-spend day.

The FinLocker Spending Analysis widget will help you identify areas where you mindlessly spend money each day. Whether it’s a $5 coffee on the way to work, a $10 sandwich and chips for lunch, or a family-sized pizza on the way home from work, it quickly adds up. Challenge yourself to have one no-spend day each week. Make coffee at home, pack your lunch, and make dinner with the family when you get home. Keep a couple of pizzas in the freezer to end the week with a relaxing pizza and movie night at home.

7 – Give yourself a splurge budget.

We all have a spending category that we can’t seem to tame. Living within a budget shouldn’t be something that you begin to resent. Instead, permit yourself to have an occasional indulgence. Take out $20 in cash each week to spend on what’s important to you – a coffee each morning, lunch, or save your cash allowance each week to buy a new pair of shoes.

8 – Unsubscribe from sales emails.

Reduce temptation from arriving in your inbox by unsubscribing from all store emails. Start by unsubscribing from every store where you shopped online in November and December. Every time you receive an email from a store, scroll to the bottom of the email and click the Unsubscribe link. The Federal Trade Commission requires all businesses to include an obvious way for subscribers or shoppers to opt-out of their email “advertising” messages.

9 – Call vendors to request discounts.

Set aside 5 minutes each day to call your credit card company, cable/internet provider, and other vendors you pay monthly to ask for a discount for your continued loyalty. To have leverage, you must be paying your bills on time and be an established customer. Ask your credit card company for a lower interest rate. Review your internet/cable plan, look at competitor companies’ plans, ask for a discount to stay with the company, or request they match the “new customer” rate offered by their competitor.

10 – Create long-term savings goals.

When you’ve gotten used to saving for the smaller annual expenses, you can look at saving for high-cost purchases or long-term goals. Create Goals in FinLocker for a vacation fund, emergency fund (aim for 3 months of your salary), retirement, a down payment on a car or home. Open a separate savings account to put aside money from each paycheck to reach your goals. Even better if you can directly deposit a set amount into the account from each paycheck.

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