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7 Places Your 2013 Down Payment Might be Hiding

February 27th, 2013


7 Places Your 2013 Down Payment Might be Hiding

By Tara-Nicholle Nelson Broker in San Francisco, CA

If buying a home is on your New Year’s Resolution list for 2013, know this: your biggest challenge will almost certainly be coming up with your down payment and closing costs.  

Whether you’re trying to scrape by with 3.5 percent for an FHA loan or you’re planning to put down a full 20 percent, saving for a down payment might be the largest savings endeavor you ever undertake, after retirement planning.

But don’t let that daunt you. Look at it as more of a challenge or a game than a slow-slogging deprivation-driven chore. In fact, I suggest that you add something to your scrounging and saving: scavenging. Finding your down payment money hidden in resources that are right in front of you can be a fruitful and fun angle to take on an otherwise overwhelming goal.

Use this short list of oft-untapped down payment treasure troves to open your eyes to funds that might be hidden in plain sight:

1.  Your budget’s biggest line items. I like to get maximum bang for my buck. And I like to enjoy my life, too, so depriving myself of little luxuries without getting much mileage toward my goal is definitely low on my savings strategies list. But I’ve often found that if you take your top 10 or so monthly expenses, there are almost always at least one or two that you could slash significantly or totally do without, push come to shove: all without feeling as deprived as you would if you cut your daily coffee.

Home buying is one of those push-meet-shove-type situations. If you’re serious about coming up with your down payment funds, sit down during your holiday off-days, and backtrack over your monthly budget (if you have one) or your last month’s checking account statements. Isolate your top 10 budgetary line items and do an internal gut check on whether there is anything on this list that you can slash or eliminate.

If this seems obvious or silly to you, don’t scoff before you give it a chance. I have seen buyers do this exercise and decide to:
  • move home or to a cheaper place to eliminate rent
  • go from two cars to one to eliminate a car payment
  • cancel cable or switch cell phone service providers to get rid of a hundred bucks or more every month,
pressing fast-forward on their down payment savings and home buying plans by many months, even years.

2.  Your bad habits. Have you heard yourself say - out loud or internally - I’ve got to stop:
  • smoking
  • drinking so much
  • eating out so much
  • eating so much junk
  • watching so much TV
  • drinking so many sugary coffee drinks
  • impulse shopping
  • OSUI:  Online Shopping Under the Influence (it’s a real thing - I promise!)
- or anything in that vein? Well, each of these are bad habits that cost. And because they are  often engaged in compulsively, they can cost much, much more over time than you have any idea you’re actually spending.  

Again, far be it from me to suggest that someone who works hard every day shouldn’t treat themselves to a coffee or lunch here or there. The fact is, if you deprive yourself too severely, there’s a good chance your efforts to cut back and save will be very short-lived, and possibly even backlash into binging behavior.  But if there’s a habit you’ve been wanting to change for health or other reasons that also costs you a pretty penny, you might find it easier to make those changes when you know you’re doing it in service of your vision of owning a home.

So, make a project of it. Figure out roughly what you’re spending on your bad habit, and set up an automatic saving transfer from your checking account into your down payment savings account. Then, get and leverage some habit-changing resources, like those at ChangeAnything.com or in one of my favorite books this year, The Power of Habit: Why We Do What We Do in Life and Business. Then, when you feel the compulsion to engage in your bad habit, come to Trulia instead and peruse new listings in the price range and neighborhood of your own target dream home - that will help you stay on track by staying mindful of what’s really important.

3.  Your stuff.  When you need to save money, there are really only two levers you can pull: you can spend less, or you can make more. Selling stuff you have and don’t use or need is a relatively painless way to make more money to go toward your down payment.  If you’re really serious about home buying, put everything on the table.

I’ve known buyers-to-be who sold any and everything, including:
  • cars and motorcycles
  • clothes, costumes, shoes and handbags
  • hobby-related gear (bikes, tools and even costumes)
  • furniture and antiques
  • and electronics, CDs and even books (think: TVs, computers, old smart phones, etc.)
to fund their down payment and home buying-related debt elimination plans.

Don’t underestimate the amount of cash you can bring in from the stuff you already own. Millions of home owners worldwide are now renting out rooms or floors of their current homes for short periods of time on sites like Airbnb and VRBO. Sites like Getaround and Zimride allow you to rent out the extra seats in your car - or the whole vehicle, if you’re not too faint of heart!  

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®
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