You’ve found a house you love, and mortgage rates are still low. Saving enough for a down payment might be tough, though.
Don’t abandon the dream of owning your own home. You can come up with the cash you need for a down payment.
Here are nine ways to save for a down payment.
1. Pay off your credit cards
When you carry credit card balances, the accumulating interest charges make it hard to wipe out that debt. Keep that cash for yourself by cutting your debt load.
Prioritize your debts and pay the most on the one with the highest interest rate. Once that’s paid off, shift your efforts to the card with the next highest rate, and so on. This is called the “avalanche” method of debt payoff.
You’ll have a lot more cash to build your savings by getting those money-sucking credit card bills out of the way.
2. Ladder CDs to boost savings
Once you free up some cash, put it to work to make yourself more money. Certificates of deposit are low-risk and relatively accessible. You can maximize the earning power of CDs by opening different certificates at varying maturity dates.
Instead of buying one big CD, spread your money into three-month, six-month and one-year certificates. This is called laddering, a strategy that gives you the flexibility to adjust your savings as rates change.
Laddering allows you to lock in when rates are high. When rates are not so good, laddering keeps you from being stuck for long with low returns.
3. Take advantage of special programs
There are several programs for homebuyers struggling to save for a down payment, especially first-time buyers. Fannie Mae and Freddie Mac, the government-sponsored agencies that buy mortgages and package them as investments, as well as various nonprofit and community groups can aid buyers who are struggling to put down money on a house. There are also state agencies that offer help.
4. Tap your IRA
Tax laws allow you to withdraw up to $10,000 in IRA funds to buy your first home. If you’re married and you’re both first-time buyers, you each can pull from your retirement accounts, meaning a potential $20,000 down payment.
Even better is the IRS definition of first-time homebuyer. Technically, you don’t have to be purchasing your very first home. You qualify under the tax rules as long as you (or your spouse) did not own a principal residence at any time during the three years prior to the purchase of the new home. In these instances, Uncle Sam waives the penalty for early withdrawal, but you may owe tax on the money depending on the type of IRA.
5. Get a financial gift
Aunt Edna always liked you best. Take advantage of that favored family status and ask her to make a present of your down payment. Tax law allows gifts of several thousand dollars a year to be bestowed without tax consequences to either the giver or recipient. The gift-exclusion amount is $14,000 for 2017 and is adjusted annually for inflation.
The gift exclusion isn’t limited to relatives. The monetary present can be from anyone.
6. Ask for a raise
No luck finding a benefactor? Then maybe it’s time to ask your boss for more money. Just make sure you do your homework and base your request for a raise on your accomplishments, not your housing needs.
7. Get a second job
Boss turned down your request for a raise? Moonlighting could help you earn the extra money. This option makes the most sense for those who are young and not fully established in their professional lives.
8. Sell unwanted items
You likely have some used furniture you no longer use or old clothes that are no longer in style. Sell your stuff to add a few more bucks to your down-payment savings.
Websites such as Craigslist, eBay, Facebook and Amazon can help you turn your castoffs into cash.
9. Look for lost money
There are about $23.8 billion worth of matured savings bonds that remain unredeemed, according to the U.S. Department of the Treasury. These bonds have been ignored or forgotten by their owners and aren’t earning a penny of interest. Make sure your bonds and other investments are still adding to your net worth.
You could also have money languishing in an old bank account. You can file a claim with the Treasury to recover lost, stolen or destroyed savings bonds. Or, check the National Association of Unclaimed Property Administrators to see if you have any missing money.