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Home Down Payment Made Easy

By Elizabeth R. Elstien

There are many ways to save for a home-purchase down payment and closing costs even though the task may seem overwhelming and a bit frightening. Be prepared to save at least 10-20 percent of the purchase price affordable to you for a down payment and about 6-8 percent toward closing costs. For instance, on a $250,000 home, you would need to come up with $40,000-$65,000. This amount will vary depending on the type of loan, credit score and other factors.

The best way to save money is to budget your finances. Calculate the household's net income, deduct all necessary (be honest here) expenses and see what you have left. Money can be saved by bringing lunch to work rather than eating out, using coupons whenever possible, trading that gas-guzzling vehicle for a more energy-efficient model or turning the air conditioning up and the heat down. Take the extra funds along with any money frivolously spent on unneeded items and calculate a monthly amount to deposit into a savings account every month. Even saving that change ads up. Don't forget to save any tax refunds or bonuses, too.

One couple I read about cut their entertainment budget so much that after a few months the husband was going stir-crazy. The couple then upped their entertainment budget a bit and still managed to purchase a home a few years later. Maintain a reasonable budget to keep your sanity.

Take on some part-time work to earn extra savings. Even doing seasonal work, such as at holiday time, can net some good funds. Just don't drain yourself doing it. Look into other income sources, too. Get creative.

Many areas have down payment assistance organizations for low-income homebuyers where they will match a percentage of what you save. You will have to follow their program for saving, but they can teach you about budgeting, homeownership and more. Find out what's available in your area.

So, you've saved a lot of money in a few years' time, but it's not enough. Try asking for a family donation. Gifting money now avoids state taxes later for the one gifting. Receive the funds about four months before your purchase for mortgage-funding reasons, and add it to the "happy house" savings account.

Still need more funds? Ask a lender about first-time homebuyer programs that help offset down payment and closing costs.

Above all, keep up the momentum of reaching for that homeownership goal by remaining patient, studying the real estate market and attending a few open houses in your price range. You'll be energized to save more to obtain your dream if you act upon that house-hunting whim once in a while.

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About The Author

Elizabeth R. Elstien has worked in real estate for over 15 years as a real estate...

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