What is your top financial goal in the next couple of years? Is it buying a new car? Paying for your child’s college education? Many people dream of owning a home and living the American Dream. It’s exciting to imagine the neighborhood you’ll live in and what kind of house you’ll buy. However, your plans may have been put on hold due to difficulty coming up with the down payment. The down payment is often where home ownership plans come to a screeching halt.
A Nerd Wallet study of more than 2,000 U.S. adults found that saving up enough cash to put down on a home is the top obstacle faced among those looking to make a purchase. Another hurdle was affordability. Houses are becoming increasingly unaffordable as home prices continue to rise, and homebuyers are feeling the pinch. The median price of an existing single family home sold in June 2016 was $249,800, up from $240,300 the month before. Rising housing prices can be partly seen in the slight dip in existing home sales, and the home ownership rate is at its lowest level since the 1960s. Both couples and singles dealt with similar challenges when it came to purchasing a home. Here are some of Nerd Wallet’s key study findings.
- Homebuyers saved an average of $1,078.50 each month for their down payment.
- It took home owners an average of three years to save enough money for a down payment.
- Roughly 42% of millennials saved on their own for a down payment while just 29% of millennials were able to do the same.
- In situations where parents helped children with their down payment, 29% of adults in the Northeast and 17% of adults in the West contributed more of the down payment than their parents.
- When it came to homeowners who purchased a home with a partner, 11% of women contributed all or more to the down payment than their partner.
Tips for saving for a down payment
Decide if it’s the right time to buy
Before you start the process of getting ready to purchase a home, make sure you’re ready. After you’ve saved up your down payment, how much will be left? Will you have enough to cover emergencies? Can you handle the mortgage payments? How much home can you realistically afford? Take the time to think and prepare.
As soon as you know you’d like to become a home owner and that you are ready to dive in, start saving your cash. It’s best to set up a savings account that is separate from your emergency savings. This way, you won’t be tempted to spend the cash, or accidentally spend your down payment, thinking you have more money than you really do.
Look for down payment assistance
Home ownership is within your reach. There are plenty of available programs that may be able to help you reach your goal. If you’re a first-time homebuyer you may qualify for down payment assistance. The U.S. Department of Housing and Urban Development has a state-by-state listing of homebuying assistance programs. Note, however, that certain requirements (such as income) must be met in order to qualify. Check out the state listings for more details.