As a whole, the millennial generation is taking longer than any other generation to become first-time homebuyers. There are a number of theories on why this is happening, with one millennials cite is the difficulty of coming up with a down payment.
While this can be a big obstacle, there are several ways to speed up the process of saving for a down payment.
A study has found that 50% of millennials are planning on getting down payment assistance from their parents. Currently each parent can gift you $14,000 a year tax-free. You can double that amount if you are married.
One way to have extra money to save for a down payment is to get a second job. If the income from your first job covers your expenses you can save all of the money that you earn at your second job. If you do this for a few years you will be shocked at the amount of money that you are able to put away towards buying a house.
Put money away before you have the chance to spend it. If your check is directly deposited into your bank account allocate a portion of your check to go directly into savings.
Moving in with your parents greatly reduces your expenses while you save for a down payment. This doesn’t need to be looked at as a permanent solution, just a short-term option for saving money. While living at home you not only save on rent, but often times on food and utilities.
Look over your budget to find areas that could be cut back. Determine your “needs” from your “wants” and stick with spending on the things that you need.
You don’t really need that $5 Starbucks coffee every morning on your way to work. Think twice before committing to other big expenses, like a car payment.
If you are renting a property on your own, look for a roommate. Once you split the cost of your rent you can start putting the half you had been paying into savings.
Realize that your first house can be a starter house and does not need to be your dream home. If you are looking at a smaller house you will also be looking at a smaller down payment, which makes it easier to afford.
While you work on getting your finances for your down payment in order don’t forget to get the rest of your finances in order. Make sure you make your payments on time and watch your debt-to-income ratio. Carefully watch your spending and decision making to help assure that you will be able to be approved for a mortgage once you have your down payment in order.
It can seem like a hassle, but by carefully planning before buying you will set yourself up for a good situation as soon as you buy.