Top Ways to Save for the Down Payment of Your First Home

Posted on by Sean Creedon

External View of HouseAre you ready to buy your first home? Want to make sure you have enough for a down payment? There are advantages to making a down payment on your first home. You can secure a lower interest rate on your mortgage as well as a lower monthly payment. But it may seem daunting to try to save up that much money. Before you start looking at any Greensboro houses for sale, consider the top ways to save for a down payment on your first home.

Start an Automated Savings Plan

Most potential home buyers find it easiest to save by having an automated savings plan in place. Typically, this involves having your financial institution automatically withdraw a portion of your direct deposit paycheck and put it in a designated savings account. It is wise to have a separate savings account that is designated only for saving for your down payment. If you are not paid by direct deposit you can set up an automatic transfer on certain days of the month to transfer funds to your designated down payment savings account. When the money gets moved automatically, it keeps you from forgetting and the money is put away before you can spend it.

Open a High-interest Savings Account or Investment Account

By putting your savings into an account that yields higher dividends, you will reach your savings goal faster. Interest-earning money market accounts and certificates of deposit (CDs) earn more interest than a basic savings account. Another option is to invest your savings in a conservative type of stock or set of mutual funds. Speak to your financial advisor about this before proceeding to make sure you are investing wisely.

Use Your IRA (Individual Retirement Account) for Your Down Payment

It is possible to use the funds in your IRA as a down payment for a home. But it is important to understand the tax implications of this decision. A traditional IRA is subject to federal and state income tax when you make a withdrawal before the age of 59½ because the funds went into the account pre-tax. A Roth IRA is not subject to taxes because the funds were placed in the account after being taxed. It is also important to understand that taking funds from your retirement account may affect your future retirement security. Speak with your financial or tax advisor before proceeding.

Real Estate Agents in Greensboro Can Help Before and After You Save

Before you make any immediate plans to buy your first home, you need to find out how much you will need to save. Meet with your real estate to get an idea of how much the home you want to build will cost, taking a few years of inflation into consideration. Once you have saved your down payment, meet with your real estate agent to begin viewing Greensboro houses for sale. Smith Marketing of Allen Tate Realtors® will work with you every step of the way to help you realize your dreams of owning your own home. Call (336) 451-4921 or (336) 663-1320 to set up a free consultation today.