There are some great deals out in the market for first time loft/home buyers or event folks who would like to upgrade their residence and/or get into a better neighborhood. But on thing gets in the way for the first time home buyer(s) — that is having enough saved for a down payment.
A savings and down payment is important because most residential lenders are looking for “Stated Loans” where you provide your income supporting documentation, the W2 or pay stubs from work (typically past two months worth) or your 1099’s and past tax filings (typically past two years). The underwriters want to make sure that you can 1) Afford the loan and have enough cushion to avoid default and/or foreclosure and; 2) Make sure that that the income stated on your income is accurate and that it meets their debt-to-income ration qualifications.
Here are some simple ways that will help you save:
1) Take Public transit – it’s fairly east to do in most Chicago neighborhoods and you can be on the monthly flat fee plan. Some employers can also pay for this through payroll deduction so you get to pay for it with pre-tax dollars. Some employers also subsidize it. Not owing a car can save you about $6,000 per year if you figure $500 per month for car payments, insurance and parking for the average car owner.
2) Reduce eating out and buying coffee from Starbucks or Dunkin Doughnuts. On average most folks spent $5-15 per day just on the coffee purchases and for eating lunch out (another $10-15 per day average). That’s at least $100 a week if you pack your own lunch or at least $50 a week if you eat out only half the week.
3) Reduce your alcohol intake – It’s good for your health and vital organs long term, but it also saves you a lot of money. If you go out with clients or other co-workers frequently, you can also just reduce the amount of drinking (at least the ones you pay for on your own). An average night out for me is at least $25 one a week which would provide a $1,300 savings a year. And not drinking as much also avoids those late night post drinking food cravings so that’s additional $$ that you are saving. You can also choose to reduce the amount going out you do to every two weeks or once a month if you are really on the savings track — think of all the new furniture you can afford with the savings.
4) Have a change cup or bucket – I use only dollar bills when I use cash for purchases and put the change in my cups and take them into the bank every month or two. This has allowed me to put at least $100-200 in savings per month and you’d be surprise with how quickly they add up.
These few savings will yield a $12,500 savings for down payment just within a one year (12 month period). This is equivalent to a 10% down payment on a house purchased at $125,000 range. Of a 3% down payment on a loft/home that’s around $415,000. Yes, there are still 3% and 5% down payment loans out there for first time home buyer(s) and if you have a FICO credit score of 700 or above.
Let me know your comments and thoughts or other examples that you have to save money on a regular baiss.