While homeownership has long been a central part of the American Dream, these days, it’s an ambition that’s becoming increasingly out of reach for many. Saving for a down payment creates a barrier to homeownership for many.
Following the financial crisis of 2007-08, many prospective first-time home buyers today are facing tremendous hurdles. The rising cost of living, including increasing rents, along with stagnant wage growth and mounting student loan debt means that today, many would-be homebuyers are struggling to make it all happen. In fact, when looking at the steps to buying a house, just saving for the down payment alone can be challenging –with 53% of renters stating that a down payment was the primary obstacle keeping them from buying a home.
But one company is working hard to make homeownership more accessible –by opening up new avenues for prospective homebuyers to source funding.
Ways to Save for a Home
Mortgage lender CMG Financial is the company behind these projects. Their division called HomeFundIt has been tasked with the job of coming up with new and creative ways to help people save up funds for their future home. This division was launched a year ago as a crowdfunding platform to allow would-be homeowners to run campaigns to generate funds for a down payment.
New App Makes Saving Easy
More recently in early December, HomeFundIt announced the launch of UpIt, a cash-back feature for its crowdfunding platform, in a move to help people raise funds even faster. This app is designed to allow shoppers to apply a percentage of their shopping bill to a HomeFundIt account, helping prospective homeowners to grow their down payment funds even more quickly.
How does it work? Simple. In order to launch UpIt, homebuyers must first sign up for a HomeFundIt account and create a campaign page. Once their campaign is up and running, a network of shoppers can then contribute to their campaign by selecting a retail partner from the UpIt store and making a purchase. As long as purchases are made through the platform, anyone can set up a fund –and UpIt funds can be mixed with money from a crowdfunding effort, or used as a standalone source.
“HomeFundIt was founded on the principle that ‘buying a home is a community event,’” explained Founder, President, and CEO of CMG Financial, Christopher M. George in a statement. “UpIt brings that idea to the next level by creating another innovative pathway to homeownership. Shoppers can support the campaigns of friends and family or choose to support campaigns they find compelling,”
Currently, UpIt has partnered with a myriad of well-known retailers far and wide including Expedia, Walgreens, Overstock.com, GAP, and more. A list of current UpIt partners is available here –with new names continually being added. And while the percentage rate varies from retailer to retailer, shoppers could see percentages going into their UpIt funds that are as high as 3% –although rates of around 5% and 10% are a lot more common.
Long-Term Saving
While HomeFundIt funds that are collected through the crowdfunding platform are good only for a year, the proceeds from UpIt –reportedly won’t expire. This means that this program could provide some exciting possibilities for anyone who may be planning long-term.
“If you have a kid, you essentially could set them up with a home savings account,” says HomeFundIt’s Paul Akinmade. “By the time they’re done with school and are ready to lay down roots, they’ll have those funds readily available to become a homeowner.”
For both prospective homeowners and parents who’d like to sock away some funds for their child’s future –this program could be worth looking into. Even if the contributions aren’t enough for them to buy their dream house outright, they could still be enough to help them afford the down payment –and qualify for a mortgage, giving them a chance to get their feet on the housing ladder.
Saving for First-Time Home Buyers
For any first-time buyer, saving for a down payment can seem impossible. But there are a number of ways to make saving up easier –putting homeownership within your reach.
Here are a few tips for saving up now:
Be Informed
Misinformation regarding down payments is prevalent, with first-time buyers often drastically overestimating their down payment, or conversely, underestimating it. My advice is to make sure you’re clear on what you’ll be paying, and then start working towards your goal. Take a look at homes that are for sale in the area that you’re hoping to buy –and talk to a local Realtor. Have a look at online mortgage calculators, and try to determine what you’ll be looking at for a down payment.
Know Your Options
While a 20% down payment is common, many banks allow less –with many first-time buyers qualifying for as little as 3% down. Just bear in mind that even a small down payment could still be costly. A 5% down payment on a $300,000 home is still $15,000.
Know Your Credit Score
In most cases, a good credit score can help you to qualify for a lower interest rate and down payment as well. It can take time to improve a low credit score, so if homeownership is in your future, you’ll want to start early to work on building yours up.
Start Saving Early
When it comes to saving for a down payment, your best option is to get started early. Consider automated savings plans, savings apps, or redirecting work bonuses into a separate savings account to help you reach your goal more quickly.
Federal, State, and Local Research Assistance Programs
In addition to federal programs, there are many state programs available for first-time buyers as well. Benefits include closing cost assistance, tax credits, and more. You’ll also want to check to see if your municipality itself offers any assistance for first-time home buyers.
If you’re a first-time buyer who’d like to get on the housing ladder remember: there are programs and options available today that can help. Start by being informed –on housing prices, your credit score, and assistance programs –then get to work making a plan. With a clear goal, a savings plan, and even help from programs like UpIt, you’ll be able to make your homeownership dreams a reality sooner than you might think!
Here are some additional resources on saving for a down payment
- How To Save For A Down Payment On A House – Kyle Hiscock
- How Fast Can You Save For A Down Payment – Abraham Walker