Want To Save A Down Payment? Think Poor!

By Gina Pogol
Mortgage Credit Problems Columnist

Mimi Asks: Dear Gina, My husband and I want to buy our first home soon. We are having problems saving up the down payment, and are considering borrowing it using credit cards and personal loans. We figured that if we time it right, the cash advances won't show up on our credit. Is that correct?

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Gina Says:

Dear Mimi,

I don't mean this unkindly, but you guys are a bad credit mortgage train wreck waiting to happen! First, understand that unless home ownership in your area is cheaper than renting, you can't afford it. Because if you can't save money now, how do you expect to come up with a mortgage payment that exceeds your rent? I am glad that you have written--to avoid a bad credit mortgage foreclosure nightmare, you need to go about buying your first home carefully.

1. Take a home ownership class. HUD-approved housing organizations offer them all the time for little or no cost. You learn what home ownership costs--mortgage, insurance, taxes, maintenance, home owner association dues, you name it. In addition, completing homeowner education can make you eligible for down payment assistance. Which brings me to...

2. Look into down payment assistance programs. In Maryland, there are programs that give you grants or no-cost loans for your down payment or closing costs if you buy your home in certain areas. There is the House Keys for Employees program. These programs frequently run out of money and then get funded again, so find out what's available now and what you need to do to get in the program. Some organizations have home ownership readiness plans that combine home ownership education with budgeting, savings, and down payment assistance.

3. Practice for home ownership. Determine what a home in your area is going to cost you--mortgage, maintenance, and other expenses. Take the difference between that number and what you are paying now for rent and put it in a special home buying account. Determine how much you need to save--that might mean your down payment and closing costs (FHA requires 3.5% down but some can come from government programs, charities, or family), an emergency savings fund, or money to pay off other debts before taking on a mortgage. Spend at least six months living on less to see how uncomfortable it makes you.

How do you squeeze extra money for a mortgage payment? Blogger DebtKid refers to it as "living poor." Basically, you pretend that you have a lot less income than you really do. You eat at home instead of going out. You share a single car instead of making three car payments. You hit the hiking trail instead of the mall when you are stressed out. He used that strategy to repay hundreds of thousands in debt. You can use it to buy and hang onto your first home. That's what wealth-building in this country is all about. Good luck and thanks for writing.


http://www.mmprogram.com/ / http://www.debtkid.com/

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