According to Builder.com, it takes first-time home buyers in the United States almost eight years to save for a down payment. This time frame is figured by factoring in the amount a renter pays for housing in each state and the required 10 percent down payment. Using this approach, buyers in South Dakota take about 3.5 years to save for their down payment, the shortest amount of time of any state.
Realty Trac released another study, which showed that it takes an averagen12.5 years for a first-time home buyer to save for a 20 percent down payment. This study is based on a personal saving rate of 6.5 percent and current median home prices. Given that most first-time buyers are young adults with earnings below the national median salary, they’d have to wait until they are 42 to be able to afford a home.
But if you use Freddie Mac and Fannie Mae 3 percent down payment plan, those savings can be made within two years. Under this program, it takes buyers in states like North Dakota as little as one year to save for their down payment. The Freddie and Fannie plan is aimed at first-time home buyers and low-income borrowers with little savings to enable them to afford a down payment.
To take advantage of this program, you’ll need to quality. You need a credit rating of at least 620 and offer full documentation of your assets, income, and job status. Prospective first-time buyers must also participate in borrower education programs and have a private mortgage insurance plan to qualify for the loan. Any buyer can take advantage of this plan, called the Home Possible Advantage plan, provided that the co-borrower is a new buyer.
How a real estate agent can help
A Southern Maryland real estate agent can help a first-time home buyer negotiate with the seller to pay all or part of the closing costs. Because they have years of experience in the market, agents can identify hidden costs and advice buyers on the best options in home financing.
Here are some ways Southern Maryland first-time buyers can boost their down payment savings.
Clear credit card debt
If you have credit card debt, making monthly interest payments on the debt while setting aside money for your down payment can be a hassle. Clear credit card debts so that you can increase your saving portion and reduce the length of time it takes for you to save the down payment.
Squeeze your budget
Start keeping track of your spending habits so you can minimize unnecessary spending and increase your savings. With a goal in mind, you can track your finances and put more money toward down payment savings.
Consider a tax-free saving account
Open a tax-free savings account so you can enjoy tax benefits on your down payment savings. Consult with a financial advisor to help you identify the best savings account for your down payment plan.
Be aware of your priorities
Remember what you’re saving for! Being aware of your priorities means you can forego instant gratification in favor of a more satisfying future reward. Saving for a down payment means you’ll need to cut back on spending on other things you want. Even saving under the Home Possible Advantage plan will require that you make sacrifices to be able to service your loan.
Save automatically
If you automatically divert a portion of your paycheck to your down payment savings, you won’t have that money available for other spending.
Final thoughts?
Proper planning and consultation can help Southern Maryland first-time home buyers maximize their opportunities and save for a down payment in the shortest time possible. Learn about the different ways to boost your savings and consult with an experienced real estate agent. But before you jump into a home buying program, ensure that you have enough information about this deal and have compared it to others on the market.
La Plata MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309
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