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Getting a Hand Up on the Down Payment Challenge

May 8, 2015 | by Michael Wilt

Categories: First Time Buyer, Homeownership

One of the most daunting obstacles to becoming a homeowner is saving for the down payment. It’s not easy, and it may require significant lifestyle changes. As Michael Corbett of Trulia bluntly stated in a Washington Post article “you’re not going to earn a down payment by [cutting out] Starbucks.” While this may be true, it doesn’t have to mean drastic changes are in order.

How much do you need?

Down payment requirements can start as low as 3.5% of the purchase price for FHA loans, but potential home owners may consider saving up to 20% for better loan terms. Either way, a down payment is immediate equity in a house and a step towards long term wealth building.

Is assistance available?

TSAHC offers two down payment assistance programs to help low and moderate-income home buyers purchase a home or refinance an existing loan. The assistance is a grant for up to 5% of the home purchase price and does not need to be repaid. First-time home buyers can also use TSAHC’s Mortgage Credit Certificate Program to save money each year over the life of the loan. We encourage you to see if you qualify for our programs as well as checking out the Texas Financial Toolbox or Bank of America’s Down Payment Resource Center to research other forms of assistance.

Put together a savings plan.

Unfortunately, many Americans are struggling with stagnant wages and rising costs of living. A recent The Simple Dollar article points out that Americans in 1975 saved 15% of their income. That number dipped to 4.7% at the end of 2014. At the same time, household income in 2013 was 8.7% lower than in 1999 when adjusted for inflation. And back then, your money went further. Now, it takes $140 to buy the same amount of goods and services that cost $100 in 1999.

This means Americans have to save more and consider other ways to earn income. The earlier referenced Washington Post article offers ways to do both. Consider saving money by:

  • eliminating small luxuries,
  • downsizing your living space to reduce rent,
  • living off one person’s income in a household,
  • selling your car or eliminating a car payment by buying an inexpensive one with cash, or
  • explore additional income opportunities like doing freelance work or turning a hobby or craft into a second paycheck.

Finally, your money should make money in a safe and low-risk interest earning account. NerdWallet has a list of good options.

Keep in mind that a home purchase is one of the most important decisions you will make. Saving for the down payment may take longer than you like, but the reward of owning your home is worth the effort.


On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

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