For homebuyers—especially first-time ones—what looms larger and scarier than the prospect of pulling together enough cash for a down payment? A late-stage IRS audit, maybe? A bracing swim in gulper eel–infested waters?
All wrong! The answer is nothing. For more and more Americans, the down payment has become the Everest-size mountain they need to climb to reach their dreams of homeownership—or perhaps freeze to death trying. In these days of rising home prices, it seems harder than ever to pull together that mammoth mound of moolah needed to get yourself into a new place. It can lead to desperation. Will you need to resign yourself to a lifetime of living with your parents, renting cramped apartments, or settling for the boondocks of Alaska (where you might be able to afford your own cabin sans running water)?
Actually, there is something else you can do: Whip out a calculator and start budgeting. That big lump sum you’re stressing over is a lot less intimidating when you break it down into daily payments. We can help!
The thrifty data team at realtor.com® crunched the numbers for America’s 15 largest urban areas to figure out just how much buyers need to save per day to eventually purchase a home of their own. Here’s how we did it:
- We looked at the median home listing price in May for the country’s 15 biggest metropolitan areas and the average percentage that buyers in those areas put down on a home. Using those figures, we calculated the typical down payment for each of those cities.
- Next, we figured out how much potential buyers need to save each day toward a down payment, over five- and 10-year timelines, to reach their goal. (We’re making the big assumption that home prices and down payment percentages remain unchanged over that time.)
We know saving is tough. But it’s also necessary—and not just for the initial costs.
“If you haven’t been able to save up enough for a significant down payment, your saving skills may not be up to the task of paying the monthly mortgage, your insurance, your property taxes, maintenance [costs], and what we like to call your emergency fund for emergency repairs,” says Michael Corbett, the TV host of Extra’s “Mansions and Millionaires” and author of “Ready, Set, Sold!” Thanks for the pep talk, Mike!
He recommends aspiring homeowners earmark their tax refunds and annual bonuses for their down payment. They can take a part-time job on the weekends or do a little consulting work to sock away those extra shekels.
“All of this only helps you toward homeownership if you put that money away,” Corbett says. “A lot of people say, ‘I’m not going to go to Starbucks anymore,’ but they don’t take that $5 or $6 per latte and actually save it.” Hey, do you really need to drink 15 of those things a day, anyway? We thought not.
So let’s take a cross-country jaunt and start saving!
1. New York City, N.Y.
Median home price: $413,900
Average down payment: 17.2% ($71,191 on a …read more
From:: Real Estate News