Ideas for solving the 20% house downpayment dilemma

I asked a few friends of mine why they didn’t maximize the contributions to their 401(k) each year and the number one reason was that they were saving up money for a downpayment on a home. All of my friends are young professionals with good salaries but with your typical rowhouse in the area costing around $200,000 to $350,000, with many far more, it’s extremely difficult for someone to come up with the $40,000 to $70,000 required for 20% down. What’s adding to the difficulty is that it doesn’t even consider the closing costs which can get up to $10,000. So, what are some strategies you can use to come up with the 20%?

First, How Much Will You Need?

This is step one, calculating how much you’ll need to save in order to reach your goal of a 20% downpayment. After you have this target number, you can start employing the strategies below to figure out how you’ll get there. Let’s say you want to buy $300,000 of house in 2 years, so that means you have 24 months to save up the $60,000 downpayment. I think you can use a conservative estimate of 4% for the appreciation of your money in savings (let’s ignore inflation because the estimates for inflation and its effects over two years are too variable to use historical numbers).

Ideas for SolvingNow, calculate how much you’ll need to save over 24 months to reach $60,000. Here’s a savings calculator (you will need Java installed, but it should ask if you don’t have it) that you can play with to reach your answer (I used a business calculator). Enter in $60k for the savings goal, 2 for the years to save, and all the other pertinent data. If the graphs aren’t updated, click on the Calculate button. The answer is $2,375 (the white boxes). You can enter in your current savings to see how far away you are, but $2,375 is your target number each month if you want $60k in 2 years at 5% appreciation. So, how do you get there?

Find A Smaller House, Different Location

Now that you have the target number, it’s time to play with it. While this sounds like a no-brainer, it isn’t that clear when you’re searching around for homes that you should settle for less house. What used to be a “starter home” in an area ten years ago is no longer a starter home as home prices, even after the recent slipping, have vastly outpaced inflation and wages. In your mind’s eye you have an image of what you’re first home was going to be, I know I had an image of a first home that looked like the home I grew up in (my parents still live there and have done so for the last 27 years). The problem was that home is at least half a million dollars in the nicer areas of Maryland, if not more depending on the home’s age and specific location, so it wasn’t within reach.

Next step? Think townhouse. Single family home on my salary was an impossibility unless I was willing to sacrifice other factors such as the location, which I wasn’t, so a townhouse was my next option. If you’re a handyman or handywoman, consider getting a fixer-upper. If you’re not picky about the location, pick a less desirable location. Ultimately the first step is finding out how little you’re willing to pay for a home and how much you’d be willing to pay and check out your options.

So, let’s say you are now willing to live in $200k worth of house and thus need only $40k in a downpayment in two years. $1,583 is now your target savings per month, a difference of $792 each month.

Ask Your Parents (Relatives, Grandparents, Etc)

This is how I was able to come up with any type of downpayment (I was only about to get around 10%, even with my parent’s help) and it’s something that requires a little of preplanning because of gift taxes. The donor must pay gift tax on any gift over $12,000 in 2007, so if your parents can help then it will help their tax situation to spread the gift out over the years. If you do this, keep this sample gift letter template in your back pocket because you’ll need to send a version to your lender when you request a mortgage.

Let’s say you’re back to a $300,000 house and your parents (or benefactor) gives you $10k right now. Enter that as your “Amount currently saved” in the tool and you’ll find that your magic number per month has fallen from $2,375 to $1,939, or a difference of $436 of savings each month.

Cut Back On Retirement Savings

This is another option that I and many of my friends did to help save a little extra. I still put in my maximum Roth IRA contribution and the minimum needed to get the employer match for my 401(k), but I didn’t contribute any more to retirement outside of what I consider the bare minimum. Some might not even contribute to a Roth IRA, but I would consider that a mistake. At this point you’ve stopped reducing the magic number and started focusing on increasing your savings, so it doesn’t make much sense to look at the calculator anymore.

Cut Back On Discretionary Spending

Start finding trimmables in your budget so you can get your savings up to your target savings rate to achieve your goal. The trimmables post I wrote back in October of 2005 still applies today and it was motivated by my own savings plan when I bought a house. It’s easy to cut something back when you think it’s only temporary and when you have a goal in mind.

I hope that with a little bit of math and some suggestions I’ve been able help some prospective homebuyers wrap their heads around where they can look to get that 20% downpayment, it was the approach I took and it ended up working for me so I hope it works for you. If you have any suggestions or ideas that I’ve missed, please let me know and I’ll add them to the list. I hope that this helps people understand that while getting 20% is difficult, it’s not impossible if you’re diligent.

Guaranteed & Immediate payday loan when tomorrow won’t do

You may be thinking of getting away for a summer break and just have seen a great holiday package on offer that ticks all your boxes. Using guaranteed payday loan for a deposit may allow you to secure that deal, even if payday is still some time off.

Having a light on the horizon in the form of a summer holiday 2018 can make those day to day stresses and strains just that little bit easier to cope with. Knowing that immediate cash loans allowed you to act quickly to get a good deal into the bargain is even better.

Cash loans

Also known as payday loans, these are advances of fairly modest amounts of money that you can use as you choose and then repay in one instalment on your next payday or possibly the one after that.

This form of borrowing is typically available online with:

– a short application process that typically may not involve any paperwork at all

– loans of around $500 being typical, though more may be available in certain circumstances

– available in certain situations even if you have had credit issues in the past

To benefit from the speed of fast cash loans, you may also need to have a bank account, which has a debit card.

If your application is accepted, you may find that your cash advance can be transferred into your bank in a couple of hours. The repayment may typically be set up as a debit card transaction, which takes place automatically on your chosen repayment date.

Provided you have a job which has regular paydays, resident then an guaranteed loan could be a solution to get you over a short term cash flow situation.

It used to be the early bird who caught the worm. These days it may be the person with a little extra cash who can react quickly to snap up those special holiday offers that may not be around for very long.

Immediate & guaranteed top payday loans aren’t just for those crisis situations. You can use them as you choose, to help manage your finances to maximise the benefit for you.

Short term loans may help if you want a late summer-spring break

Sometimes spring may seem to be never ending. Using short term loans to allow you to book yourself a late spring holiday may help get you through.

The trouble may be though that sometimes the best bargains may crop up just before payday – when you have least available ready cash available.

Short term loans may be available that can give you access to small amounts of money for a period of time, which could be just as short as a couple of weeks until you next get paid.

You pay interest on the loan but only for the number of days that you have it.

These loans are typically available online and you may find that the process can be completed from start to finish very quickly you enter a few personal and employment details. Show much you would like to borrow and the payday on which you’d like to pay the loan back. You may also need to have a bank account which has a debit card attached, a fast credit check will typically be all that’s necessary.

If your application is approved, you could find that the funds can be credited to your bank account in as little as a couple of hours – if your bank can accept such payments. On your chosen date the loan repayment together with agreed interest charges, can be deducted automatically from your account via a debit card transaction.

Once the money is in your account, it is yours to do with as you choose to pay for your holiday, to get yourself some new clothes for your break, to provide a little extra spending money so that you can let your hair down and really enjoy yourself.

As with any loan, you may wish to ensure that you are comfortable with the repayment arrangements. Since with this type of payday loan there is only one repayment (which includes any interest and admin fees), you may need to be comfortable that you can afford this from one pay.

So, short term loans could give you the flexibility you may need when trying to arrange a late spring break at short notice.

Need an advance to payday to help you get through the month?

Some months can be difficult – it’s as simple as that. Unexpected bills or the sudden opportunity to purchase something cheap may cause you some financial embarrassment and get you thinking about some form of cash advance to payday.

The good news is that you may be able to obtain fast help in that respect through something called a payday loan.

As the name suggests, this loan has been developed to allow you to borrow modest amounts of money in advance of payday. There are very simple online application facilities available and the loan providers will give you a very fast response to your application.

If your application is approved, the money will be sent electronically to your bank account and you may find it available to you within as little as a few hours or perhaps the following working day.

To pay it back on your next payday, all you have to do is to make sure that you have enough funds in your bank account to cover the loan plus the loan provider’s charges (which they will notify to you at the time you apply for the loan).

They will then debit your bank debit card to recover the total amount and the loan will be completed without further lengthy repayment periods.

An advance to payday of this type is fast and easy to arrange and because the sums lent are typically smaller, you may find that the loan providers are relatively relaxed about some forms of credit history problems.

As the above process outline indicates, to obtain a loan of this type you will need to have a USA bank account and associated bank debit card. You will also need to be in permanent employment and receiving a regular income of a predictable amount.

Although larger sums may be available, it hopefully goes without saying that the amount you are asking to borrow will need to make sense against your regular monthly income, given that you will be repaying it in one go when you next get paid.

An advance to payday in the shape of a payday loan may prove to be a very useful facility.

Make Valentine’s Day a bit more special with a payday loan

The problem with Valentine’s Day is that it falls on the 14th of the month. That may mean that it is something of an embarrassment in terms of your cash flow. If so, a payday loan may be able to help.
Valentine’s Day
A mid-month crisis

The problem with birthdays, anniversaries and special events that fall in the middle of the month, is that they are typically either a bit too late or a bit too early for our monthly payday.

Yes, in theory, we should all budget and plan to buy our Valentine’s Day treat for a loved one at the end of January when we were last paid.

Yet life isn’t like that.

If you have had expenses and other unplanned spending needs early in February, by the time you approach Valentine’s Day, your bank balance might not look to be in the healthiest of conditions.

You could, of course, try explaining this to your loved one and perhaps they would understand – but then again they may not!

Loving the payday loan

A payday advance loan might just help you survive such a financial and possibly emotional crisis.

Applying online, you’ll typically be able to borrow between $100-$400 (perhaps more in some cases), which may be sufficient to enable you to buy something or to arrange a special treat.

On your next payday, the loan provider will simply charge your bank account, through your bank debit card, to recover the loan plus their charges that you’ll previously have seen and approved.

Loans are typically available with a minimum of fuss and as the sums are smaller, you may find that the qualifying requirements are relatively easily met. For example, you may be able to obtain such a loan even if you have some credit history problems behind you.

You may find that it is rather easier to obtain a loan of this sort than it will be to explain to your loved one why you have apparently neglected them on Valentine’s Day!

What you’ll need

To obtain a loan, you’ll typically need to be:

aged 18 or over;
in permanent employment that is generating a regular income;
a USA resident;
in possession of a USA bank account with an associated bank debit card.

Finding out more about the payday loan might be a good idea and could make Valentine’s Day extra special.