For home buyers, there are few things as big and scary as the idea of pulling together enough cash for a down payment. It has become the Everest-sized mountain to climb in order to reach any dreams of becoming a homeowner. And with home prices continually rising, it seems as if the mountain keeps growing higher and higher. It can leave you feeling desperate and exhausted.
The good news is that you don’t have to feel that way. You won’t have to resign yourself to a lifetime in your parents basement, or living in tiny apartments with too many roommates, you just have to start budgeting. Keep reading to learn how you can take that huge down payment goal and break it down into totally do-able, daily payments to fit your budget. Click this link to read the full article on budgeting for your down payment.
- 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. (We are only looking at metropolitan statistical areas—metros—as defined by the U.S. government. They typically include surrounding suburbs.)
- 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.)
- To put that daily savings target into perspective, we tallied up how many delicious Starbucks grande Caramel Macchiatos you’d need to skip buying to reach your goal. The heavily caffeinated drinks cost $4.45, according to fastfoodmenuprices.com.
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 decaffeinated cross-country jaunt and start saving!
1. New York City, NY
Median home price: $413,900
Average down payment: 17.2% ($71,191 on a median-priced home)
Daily saving goal (5 years): $38.99
Daily saving goal (10 years): $19.49
Prices in the City That Never Sleeps may make homeowner hopefuls want to pack up and head for cheaper parts of the country. But you’d miss out on the world-class theater, museums, and restaurants; the endless career opportunities; and the chance to run across Woody and Soon-Yi while walking your Yorkie. (It’s your call as to whether this is a good thing.)
The median sale price for those dreaming of a Manhattan address hit a record high of about $1.1 million in the second quarter of 2016, according to the most recent Elliman report. But those willing to buy in the city’s other boroughs—even hipster Brooklyn—as well as surrounding burbs can save bundles.
2. Los Angeles, CA
Median home price: $678,000
Average down payment: 18.3% ($124,074)
Daily saving goal (5 years): $67.95
Daily saving goal (10 years): $33.97
It may feel like you need the salary of a movie star or, at the very least, a Flo-from-Progressive-level commercial actress to afford your own digs in Los Angeles. But fortunately for those not being stalked by the paparazzi, a recent report by the Los Angeles County Economic Development Corp.projects that key employment sectors will add thousands of jobs in the next two years: health care; construction; and professional, scientific, and technical services. And there’s even a booming neighborhood where tech startups and outposts of companies like Google and Yahoo are clustered—it’s known as Silicon Beach. Isn’t the word “beach” alone worth giving up all of those delectable hot beverages (or their equivalent) until it’s finally time to write that big check? No, you don’t have to answer.