How to Save for Down Payment

My renters and "want-to-be" first time home buyers, this post is for you!

With all the homes being built in the NOVA area, I bet many of you are wondering, when am I going to buy? And how do I get started?

One of the most important things to understand about real estate is the concept of ownership, interest and money. For many people, and many millennials, this is a discussion that could last for hours. 

I’ve been told several times that “I want to buy but I don’t have money.” or more sadly, I want to buy, we meet and discuss finances and find out that they don’t have any money to purchase. The downturn of 2006 did not make it easy for millennials who wanted to work, get their career started and save for a new home. Many had to stay at home with their parents, and wait indefinitely for their situation to change. 

For expanding families and those who want their own space, this delay can be heartbreaking. Once you are on the same page and ready to take the next steps, you want to move - NOW, and yesterday and this minute! 

Dream Home, Ready, Set, Go!

It feels like this house is perfect, and - no it's gone! And this one, I won't be ready, and then this one.. ahhh! I missed it too. 

Well, there is a silver lining to this home buying process- you only need one house, and there are enough homes in this DC area. But planning and getting intentional about what you want is going to get your there faster. 

So, this post is meant to take the heartbreak out of home buying.. my motto is “on time. best price. with ease.” and that’s what this is about.

When I purchased my first property, a condo in DC, I was 27 years old. It was very exciting time, but I bought 4 years past my original plan. I was trying to purchase when I was 23, but on 9/11 I went for a loan class and everything went upside down at the same time. 

I lost my job, and it took a while to get back on my feet. So at 27, I bought my first property. I worked in sales at the time, and I was good at it. It was my plan to put aside my sales commissions for the downpayment, and my parents were kind enough to match it. 

Each time I had a commission come in, I would put it in a separate account so I would not spend it. It was my savings account, and it was so helpful to put that money aside. I also kept a habit of transferring money to that account each month so that a small consistent nest egg was built. 

This was a good plan, but over the years, I have read and found better ways to put money aside. Here are a few that I think help you take the next steps forward. 

1. Open Multiple Bank Accounts and Automate. 

Now I would recommend to myself to put the money away each month. There are so many banks that offer free bank accounts, for example, Capital One, and you can open them and label each one with your plans. For example, one account would be emergency, one would be short term expenses, and another would be long term expenses. If you were planning a big vacation or a new car, you may open a separate account just to put money aside for that project. 

2. Pare Down.

I would make sure I didn’t have extra expenses that I could live without- such as TV, memberships that were extraneous and put that money aside. I would slice out things now that would not feel painful to my everyday living and save the money.  I would however, keep memberships and activities that were important and useful to me such as a gym membership, Hulu for entertainment, or healthy foods from the grocery store. 

3. Beware of Unnecessary Subscription Services. 

And I would beware of subscriptions that you don't need.  Recently I made a $100 payment for taxes from a bank account. The bank account immediately flashed a pretty screen message that said something like "Join Pay Intelligent" and we will help you save and make a monthly payment for this bill with no interest and a small monthly fee. 

I was appalled and shocked. That monthly fee is an INTEREST RATE! It was

a subscription to take my $100 one time payment, break it down over 12 months to $8/month and add a fee. If they added $1 on top each month, that would be 12.5% interest added to my payment! In the end I would pay $108 instead of $96, and while that may seem small, it adds up fast when you do it everywhere. 

I've digressed, but I think you get the idea. Every time you make a payment into your bank accounts, you are making an investment in yourself. It could be $5, $10, or much more, but every dollar counts. And these dollars you are putting away are counting for YOU. And this is how you save for your dream home. 

Let me know your thoughts and if I can answer any questions: smita.lal_at_lnf.com

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