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You probably have certain goals in mind for the New Year, and buying a home may be one of them. But in order to do this, you will need to bring money to the table for a deposit.
Most mortgage lenders require at least some cash at closing (although there are some loan programs that do not require a down payment, such as VA loans). And if you don’t put down a 20% down payment on a conventional loan, you’ll be forced to pay for private mortgage insurance (PMI). With that in mind, here are three tips for setting up your down payment in 2022.
1. Determine what down payment you need
Your goal may be to put 20% less on a home you buy to avoid PMI. But one thing you need to know is that home values are inflated right now and prices are likely to stay high in 2022. Reaching that 20% could mean having to push yourself even harder on the savings front.
To help you stay focused, research the different neighborhoods you want to live in and see what the houses are actually selling for. This way you will have a better idea of how much you will need for a down payment.
If saving for a home is a priority for you in 2022, you may need to make a few changes to your budget to make this easier. Take a look at your different expense categories and see which ones can potentially be reduced. If you normally spend $ 500 a month on entertainment and restaurants, cutting that number in half will leave you with an extra $ 3,000 by the end of 2022.
3. Increase your income with extra work
Cutting back on spending in your budget might not go any further in helping you accumulate a down payment on a home, especially given today’s prices. This is why it is worth considering a side activity in addition to your main job. Since the money you earn from a side gig won’t go toward existing expenses, you should be able to save everything for the purchase of a home (less what you owe the IRS in taxes on that income. ).
If you’re not sure what to do, think about your schedule as well as your income goals. If you don’t have a lot of hours to devote to a side gig, you’ll likely need to go for flexible work, like entering data from home at your own pace. But if you have ambitious savings goals, you may need to commit to a predefined timeline and spend more time on it.
Finding a down payment on a home is no easy feat, especially at a time when house prices have skyrocketed. But if you do your research, prioritize savings in your budget, and increase your income with a second job, you may be able to meet that goal in 2022 and reap the many benefits of owning a home.
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