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by Maurie Backman | Published on Dec. 4, 2021
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Want to buy a home in the new year? Here's how to come up with the money.
You probably have certain goals in mind for the new year, and buying a home may be one of them. But to do so, you'll need to bring money to the table for a down payment.
Most mortgage lenders require at least some amount of money at closing (though there are certain loan programs that don't require money down, like VA loans). And if you don't make a 20% down payment on a conventional loan, you'll get stuck paying private mortgage insurance (PMI). With that in mind, here are three tips for coming up with your down payment in the course of 2022.
Your goal may be to put down 20% on a home you buy to avoid PMI. But one thing you should know is that home values are inflated right now, and prices will likely remain high in 2022. Coming up with that 20% could mean having to push yourself on the savings front even more.
To help yourself stay focused, do some research into different neighborhoods you want to live in and see what homes are actually selling for. That way, you'll have a more specific idea of how much money you'll need for a down payment.
If saving for a home is a priority for you in 2022, then you may need to make some changes to your budget to facilitate that. Take a look at your different spending categories and see which ones can possibly be cut. If you normally spend $500 a month on entertainment and restaurants, cutting that number in half will leave you with $3,000 extra dollars by the time 2022 wraps up.
Cutting expenses in your budget may only go so far in helping you accumulate a down payment for a home, especially given today's prices. That's why it pays to consider getting a side hustle on top of your main job. Since the money you earn from a side gig won't be earmarked for existing expenses, you should be able to save all of it for home-buying purposes (minus what you owe the IRS in taxes on that income).
If you're not sure what side hustle to get, think about your schedule as well as your income goals. If you don't have many hours to dedicate to a side gig, you'll probably need to go with a job that's flexible, like doing data entry from home at your own pace. But if you have aggressive savings goals, you may need to commit to a preset schedule and put in more time.
Coming up with a down payment for a home is no easy feat -- especially at a time when home prices have soared. But if you do your research, prioritize savings in your budget, and boost your earnings with a second job, you might manage to reach that goal in 2022 and enjoy the many benefits of being a homeowner.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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