I have $0 saved for a down payment. I want to buy a home in five years. What should I do? Go:

Forum|Forum|7 years ago
August 3, 2018
36 replies
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Title says it all, but I'm looking for a five year plan. How can I save enough for a down payment? And what other things can I do, over these next five years, to prepare me (credit score improvement, etc.)?

Give it to me straight Team.

(oh, and some related details: credit score sits at 760, I have literally no debt at the moment, I can't imagine buying a $1M home so let's assume the down payment will be south of $100K, I'm 32 years old, and I've got a grad degree)

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victorvanhyfte

Employee

First of All: 1) you need to START SAVING MONEY any way you can and probably put it in a Credit Union Savings Account since they are currently paying better interest than a Bank. 2) You need an EMERGENCY FUND of at least 6 Months of your Net Salary after Taxes. 3)Don't take on any Debt or Limit it to a Bare Minimum. 4) Apply for a 0% Credit Card with at least 18 months Interest Free that ALSO HAS FREE CREDIT FICO SCORE MONITORING and use it to make small purchases and then make MORE than the Minimum Payment Every Month by either paying off the balance every month or paying at least 4 times the Minimum Payment. Your Credit Limit will be Increased by the Credit Card Company Eventually and Your FICO CREDIT RATING SCORE will most likely INCREASE if you play it right. 5) Check online to see if YOUR STATE has a FIRST TIME HOME BUYER PROGRAM that YOU CAN QUALIFY FOR. Usually they have DOWN PAYMENT ASSISTANCE and LOWER INTEREST RATES. 6) Find a Home you want to Purchase and work with YOUR REAL ESTATE AGENT, NOT THE SELLER'S AGENT to Make a Purchase Offer that requests Cash Back From the Seller at the Closing to USE FOR CLOSING COSTS AND FEES. I did it. The Seller gave me $3,000 for Closing Costs, MY STATE gave me $2,500 for Down Payment Assistance and I bought a $97,000 House for ONLY $1,300 out of MY OWN POCKET. 7) Make sure that in YOUR OFFER TO PURCHASE you RESERVE THE RIGHT to HAVE THE PROPERTY INSPECTED by A HOME INSPECTOR, Request the SELLER PAY FOR REPAIRS(VA & FHA require it), or get CASH at Closing for the Repairs. AND, have ESCAPE CLAUSES, i.e. SUBJECT TO's built in so you can back out of the deal if it's a MAINTENANCE MONEY PIT and the Seller won't budge. Let them keep it! A good BUYERS AGENT will PROTECT YOUR BEST INTERESTS. GOOD LUCK, My FIRST Property the Seller wouldn't pay for needed repairs so I dumped him and found another Property and An Initial Offer, Seller Counter, and My Counter Offer, Seller Acceptance and VOILA! I own a home and my P.I.T.I. Mortgage is way cheaper than RENTING A SIMILAR PROPERTY.

Manki1028

Employee

In general, I'd suggest not to purchase a home unless you make at least 50% of that per year. If purchasing a 200K home, make at least 100K. Therefore, since you want a 1M home, you need to make 500K. If you can't afford that, move somewhere that has a better cost of living ... I'm able to follow this rule no problem.

Mammadaisy

Employee

Said "not looking to" in regards to 1M home. I had to read that twice too.

Mammadaisy

Employee

Lots of good advice already but I would add that many companies offer as part of their benefits membership in a discount program. Many times there are offers on mortgages. Check with your employer if you're not sure if they offer one of these programs for their employees.

Jose nieves 54

Employee

Yo tengo 0$ salvados en pagos bajos

NMcCormack

See if USDA loans are available where you're looking. They are 0 down.

ssimba777

First congratulations on planning to buy a house. As one year old homeowner, I can encourage to build a fund for down payment. Build it like a debt payment. Establish an index passive fund, the commission fee is lower. Make direct deposit either from your checking account or a direct deposit from your paycheck.
2- Track down the area you aim to live from trulia.com or zillow.com or realtor.com. This will keep you motivated during the process. If you are engaged or married, enroll your partner in this process. If not, consciently or not your plan will get delayed.
3. Assign a percentage for your down payment. 5%, 6%, etc.
4- Work on your debt, or avoid them. This will help you obtain a better interest rate on your mortgage.
Marketers will flood your boxmail with looking good offer for personal lawn. Do not take the bait. This is a trap to eat up your ressources.
4- When you are ready, shop around for morgage lawn. An interest of 3.45, instead 3.15 would increase your mortgage by hundred or thousand dollars.
It requires discipline and commitment. Good luck and congratulations.

Dwoods

Employee

Also.. aside from irrelevant things like curtains, you can take out money from your 401k from work to use to your primary residence if you have access to it and need to. Many companies match your contributions to a certain point.

Another big this is when think you're ready to get preapproved soon, DO NOT move money around that cant be easily explained. And it's better just not to have to explain. Try to keep your "books" as simple as possible for the prior at least 3 to 6 months if you can.

Example, you found THE house and its a little out of your preapproval range, so you got 10k cash laying around or your parents want to pitch in 10k...underwriting will want to know where it came from. If its a gift from your relatives or something then you're volunteering them to divulge all their bank statements too. Maybe yours wont care but many other people out there would not be happy to have to do that. If it's your 10k cash that you threw in...you best have a paper trail or you may hit a wall in your loan process. And don't go and buy a vehicle or furniture on credit until you've actually closed on the house. That could break your loan on closing day. Don't let that happen.

Boopie

Join the military for two years. Army has shortest enlistment. Don’t get killed. Report any ptsd or headaches/backaches whatever, get 10% or more disability. Then get out get a VA loan, which have better rates overall since the default is low for veterans, no money down and never pay pmi, with disability (exempt) pay no VA funding fee. Use your gi bill, army college fund, tuition waiver, financial aid and get paid to go to college while you pay off your VA loan financed 4 flat and collect money from your three other tenants as you attend school. Graduate, have a great life!

Deadwind96

Check out Dave Ramsey.

Stonetone

Are you a veteran by chance? If you ever served in the military and we’re honorably (and sometimes even generally) dischanged, you qualify for $0 down payment.

All active, reserve, and veterans qualify for a VA letter (as long as you served honorably). This letter is a promise from the VA that you will make the payments. It’s not a loan however. You will still need to get a loan through a lender but a down payment is not required.

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