If the challenge of home ownership is saving up for a down payment, these Reddit users had suggestions.

For many, the biggest obstacle to buying a home isn't whether they can make the monthly payment. After all, some people pay more rent each month than they do on a mortgage. The main obstacle is to provide a large enough down payment to apply for a mortgage.

To get an idea of ​​how normal people save for a down payment, we visited Reddit, the online version of people who meet in a park and ask each other a bunch of random questions.

The nice thing about Reddit is the variety of answers. When a user who named the handle fuzzypinkgiraffe asked community members for advice on how best to save for a down payment, Redditors didn't disappoint. Here are some of their answers.

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Check out special programs

A Reddit member called PersoanlFinanceD must have had conversations with Fuzzypink Giraffe because she knew Fuzzy's partner was a doctor.

Knowing this, she wrote: "Other recommendations may vary, but I've only cut 5% and used a program from JD Mortgage that emphasizes future cash flow and does not require a PMI to refinance from this program without the PMI ever had to be added. I can imagine your partner being eligible for a similar program based on their MD, so be sure to check this out too! "

PersonalFinanceD was absolutely right. A doctor loan is a mortgage designed to help new doctors who are just starting out. Since many new doctors are unable to take out a mortgage early in their careers due to an unusually high debt-to-income ratio (DTI), this program allows them to buy a home with no money and no personal mortgage insurance (PMI).

There are also special home purchase programs for:

Live under your means

Several members of the Reddit community shared their experiences of living on less than they earned until they could save enough to get into a house. One Reddit user with the creative grip of Futless buttless wrote, "My partner and I lived with family and roommates until (we were) 30. We worked 2 jobs or a lot of hours a couple of years of super reduced rent due to the family. But living together with your family / roommates for years is standard with us. "

Another member named lynrn added, "It wasn't glamorous, but I basically lived the way I did in college … so I had several roommates, a small kitchen cabinet that prevented me from having room [sic] a lot and I haven't traveled much. I also picked up an extra shift every pay period to make some extra cash. For some context, I'm a nurse. "

Invest

Some respondents were surprisingly upbeat in their belief that fuzzypink giraffe and her partner should invest the funds they hoped could one day be used as a down payment.

This was offered by a user named tceeha, "I don't know what you think is conservative, but I'd at least try to put the money in an S&P 500 index fund. In my VHCOL (very high cost of living) area, the strength is in The stock market tends to cause house prices to rise. "

sun7bunny was part of the Amen choir on the topic of investing. They wrote (in part): "We are saving for a very high down payment in a VHCOL. Since our emergency fund has recently been fully funded, we have been able to deposit more into a brokerage account. Our allotment is 60% stocks and 40% bonds as we assume we will need to access this money in 3 years. When we first opened the account a few years ago, our allocation was 75% stocks and 25% bonds. "

Grow money in a high-yield savings account

Several community members suggested that the original poster and her partner put money in a high-yield savings account (HYSA).

N0timelikethepresent offered this insight: "We saved up for our $ 130,000 deposit in a HYSA. Some of it was during the pandemic so it didn't help spending any money. We also had to downsize our wedding due to the pandemic and saved a considerable amount of money that went into the down payment. "

As with a "normal" savings account, you have access to your money in a HYSA. The difference is that the interest rate on a high-yield account is higher than the interest rate paid on a standard savings account. Today's low interest rates mean you won't make much on a HYSA, but you will make more than you would if you deposited the money into your regular savings account.

Where you hide the funds is important. For example, today we found that Goldman Sachs' online bank Marcus is currently paying an annual percentage rate of return (APY) of 0.50% on their HYSAs, while a local credit union pays 4% on the first $ 1,500 and then a measly 0.025 % on anything above this amount.

Deposits up to $ 250,000 are protected as long as the bank you choose is FDIC insured. To make sure your bank is an FDIC member, ask before opening an account or check the FDIC's BankFind tool.

Amid the discussion, a member of the Reddit community offered a piece of wisdom. Ngr2054 wrote, "When you buy, you are buying for what you can currently afford – you can always sell and move. You never know what will happen to your health or career."

Well said, Ngr2054. Well said.

source https://seapointrealtors.com/2021/07/31/how-6-homeowners-saved-for-their-down-payments/

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