While you can find a slew of homebuyer programs that allow you to put very little down payment on a new home — sometimes as low as a zero percent down payment — generally, it’s better to put down at least 20 percent in cash. A higher down payment equates to lower monthly mortgage payments and puts you closer to having some real equity in your property. You can also avoid extra fees like private mortgage insurance (known as PMI) with a higher down payment.

But saving for your down payment isn’t always easy. With the high cost of renting these days, you may have little left over to go into a separate savings fund. And you have to be saving for your down payment in addition to the other important savings plans, such as for your retirement or for the kids’ college funds.

Improve Your Position

When you’re out house-shopping in a really hot market — such as San Francisco, CA, and Asheville, NC — you’re facing a slew of obstacles. Prices are high; there’s more competition for the good deals; and the homes available in good neighborhoods are getting scarce. Having a large cash payment to put down on a home improves your position substantially.

And even though you’ve found a super mortgage lender in Zack Adam at GoPrime Mortgage, Inc. . (Prime Mortgage Lending and Equity Services, Inc.), you’ll get better rates and more options on loans with a substantial down payment. You’re just in a better negotiating position overall with that 20 percent in your pocket.

Tactics to Save for your Down Payment

With your eyes on the prize and that new home within spitting distance, you can rally up the self-discipline it takes to start saving for your down payment. Try a few of these proven tactics:

  • Get automatic withdrawals taken out of your paycheck. It’s those automatic savings that you never see that are sometimes the easiest to part with. Choose a fixed amount or go with a percentage from each paycheck.
  • Sock away all windfalls. Every time you receive a one-time unexpected windfall, put it toward your down payment. Windfalls include tax returns, bonuses, settlements, gifts and inheritances.
  • Pick up a side job or a part-time gig that’s strictly for saving for your down payment. Put your entire earnings in an account you set up specifically for that purpose.
  • Tap into your IRA to take advantage of the penalty-free withdrawal you can enjoy if this is your first home. You’ll pay taxes on the money if you take it out of a traditional IRA, but no extra taxes on ROTH IRA withdrawals. The limit is $10,000.
  • Invest your savings in an account that pays the highest interest, such as a money market or a low-risk mutual fund.
  • Cut expenses. You may, for example, decide to forgo your annual new car purchase or maybe go without cable, while you’re saving for your down payment. Whatever it takes, the sacrifice will pay off.

As you’ll soon discover, every little bit adds up. With discipline and foresight, you’ll have your down payment in hand before you know it. Set a timeframe and a specific goal to help keep you on track. Maybe even get one of those big “thermometer” posters that nonprofits use for fundraising to help keep you focused. Make it fun — it’s worth it!

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