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Planning to Save

By
Mortgage and Lending with M & T Bank

How do you save enough money for the down payment? This is often the most daunting challenge that you will face as a new homeowner. You don't have a house to sell and you may need to do this on your own. Not to worry. The biggest challenge is to make the commitment to save the money.

Let's get started. First you need to look at your budget. Take a week and see where you are spending your money, I know, it's frustrating. Get over it. You do want the house, don't you? Get a small note book and start to keep track. At the end of the week you will be alarmed at how much money you waste. Be honest with yourself. This exercise may change your life.

Now that you have found all of the holes in your budget, you can start to collect your reward. When my wife and I stated to save money for our new home we completed this exercise. Since we were not married at the time, we decided to save equal amounts of money and we opened a separate house account to build up our savings. Each week we committed to putting money into the account. Before we knew it we had several thousand dollars in the account. We saved it a few dollars at a time. Each time she put $50 in I would match it. We even got out kids involved. We had them collect bottles and cans in the house and when we turned them in that money went into the house fund. I know it's corny but I own a home.

The point is that you need to make a commitment to save money to buy your home. There is no wrong way to make this commitment. If you start to recognize where you are spending money, you can find opportunities to save money. Even if you don't buy a home, the money you save can pay for a nice vacation.

Once you start to save money, look at vehicles to help you save more money. Use automatic payroll deductions. This way you'll never miss the money. There are many ways that businesses try to separate us from out money. They offer credit, low monthly payments etc. Stop and think before you buy. Will you really use the product? Why are you buying it? Will owning this new product or service get you to where you want to go?

Answer these questions honestly. The people who own homes have answered these questions.

By now many of the loan officers reading this are saying "What about zero down?" They don't need to save. Yes, they do need to save. Having financial balance and a safety net are critical to long term financial success. People who are able to save have better borrowing opportunities and limit their exposure to risks faced by others, who have to borrow for emergencies.

Just some thoughts for you to review, while you are thinking about preparing to buy a home. Planning and saving are signs of maturity. Having a savings safety net helps your state of mind and can ensure success.

Does anyone have any savings ideas to share?

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

John, I completely agree and especially with what you said about the zero down.  Even if you do a zero down program they are still going to need to have money to take care things that go wrong unexpectedly.

Great advice, you can never go wrong by having money in the bank, and the tips that you give in order to achieve this are excellent. 

Dec 04, 2006 11:29 AM
Kaushik Sirkar
Call Realty, Inc. - Chandler, AZ
Alas, savings is a lost are...in the country as a whole!  Aren't we at an all time LOW savings rate??
Dec 04, 2006 12:21 PM
Brian Brady
Matthews Capital Markets - Tampa, FL
858-699-4590

Saving for a home is quite easy if you train your buyer 4-6 months ahead of time. 

Let's say their rent is $800/month and your proposed payment for a  $200,000 home is  $1500.  Have the clients save $750/month to show that they can make the payment.  They'll have the 3% downpayment needed in 9 months.

Of course, noone has the discipline to put off something as trivial as a home purchase for 9 months 

Dec 04, 2006 04:53 PM
John Klassen
M & T Bank - Kingston, NY

All of your comments hit the mark. The funny thing is, once you start saving it can be as addicting as blogging. I have two couples who just hit the $100,000 in savings mark. Mutual funds, CD's etc. These become great clients for second home and investment properties because they have the financial strength to do so.

They are also a higher quality client who while they may be rate sensitive are value driven.

Thanks for your comments.

Dec 04, 2006 08:47 PM
Jennifer Fivelsdal
JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY
Mid Hudson Valley real estate connection
John my saving tip is  stop going to Starbucks, this is what I tell my husband.
Dec 05, 2006 12:40 PM
John Klassen
M & T Bank - Kingston, NY

Another tip is to bring lunch to work, on average $8.00 per day and take a cup of coffee from home instead of the deli. Another $1.25 per day. This is $46.25 per week times 50 work weeks equals $2312.50. This would cover almost half the closing costs.

Our wallets are like collanders, the money leaks out it doesn't run out.

Thanks for your comment.

Dec 05, 2006 10:46 PM