by Maurie Backman | Sept. 4, 2020
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Buying a home may seem impossible in the near term, but here are some ways to eke out savings for your down payment.
Saving for a home takes discipline, and while it's a tricky thing to do in the best of times, it can be even harder deep in a recession. Such is the case these days, thanks to the COVID-19 pandemic. Not only is the economy stuck in a slump, it could stay there well into 2021.
On the other hand, mortgage rates have been historically low during the pandemic, so if you come up with a down payment in the course of this recession, you could have a great opportunity to score an affordable home loan.
Where exactly will that money come from? If you're out of work or have suffered a decline in income, saving for a home may not be possible right now. But if you're still employed and haven't seen your paycheck decrease, coming up with down payment funds may be more feasible than you'd think -- especially if you adopt these key strategies.
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A lot of people have altered their lifestyles during the COVID-19 outbreak. If you're no longer commuting to work, aren't buying lunch every day, and have a lighter social calendar, then you may have a real opportunity to bank extra cash.
Take a look at your lifestyle and budget, and see where savings opportunities exist. For example, if you're spending $20 a month on gas for your vehicle instead of the $100 you'd normally spend on commuting, put that $80 into a dedicated savings account for your down payment -- don't spend it on takeout or other luxuries. As much as those things might make it easier to get through the pandemic, reward yourself with the promise of a new home instead.
A lot of people altered their vacation plans this year due to the pandemic. Perhaps you've considered driving to a nearby destination instead of flying, or renting a private home for your getaway instead of staying at a hotel. But while you may be itching to escape your local surroundings, skipping your vacation altogether could put a few thousand dollars or more back in your pocket. That's a nice chunk to add to your down payment, especially since you may not be able to take your dream trip anyway.
A side hustle is a great way to boost your income. But the gig economy isn't exactly thriving right now. Lots of people are cutting back on luxuries, so usual opportunities -- think dog walking and rideshare driving -- may not be readily pursued. On the other hand, certain services are seeing a spike in demand during this recession -- online tutoring, personal shopping, and delivery hauling, to name a few. Snag one of these gigs, and you could score additional cash to facilitate a home purchase.
Ultimately, your strategy for saving during a recession may not be all that different than your approach during healthier economic times. At the end of the day, amassing a home down payment requires you to spend less and save more. In some ways, the current recession might make it easier for you to get serious about saving. With so many people cutting back on expenses and a pandemic in play, there's probably less pressure for you to blow money on expensive nights out, fancy trips, or new clothing (your colleagues are highly unlikely to care if you're wearing the same old shirts on your Zoom calls). Take advantage of these unfortunate circumstances and use them as an opportunity to achieve the goal of getting a home to call your own.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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