Saving for a Down Payment While Renting
Many people are discouraged and disheartened by the rise in rent prices throughout the U.S.
Since 2019, the median rent for one-bedroom and two-bedroom units has increased by 13% and 16%, respectively.
Right now, one-bedroom rentals are at an all-time high.
The high rental prices in Albuquerque coincide with an overheated housing market. There have been record-setting home prices due to demand, inflation, and reduced home construction. Rental prices are rising because potential homebuyers are priced out of the market, requiring them to stay in the rental market.
As a renter in Albuquerque, it can seem impossible to save for a down payment when so much of your income goes toward rent. Homeownership feels unattainable for a large portion of the population.
It’s decidedly not an easy issue to work your way out of, but it is possible.
Figure Out What You Need
Start by crunching the numbers. It will be easier to achieve your goals if you have a concrete number for the down payment you need. If you don’t have a plan in mind or a set number to work toward, you’re going to feel scattered, and it will be much harder to get out of the rent cycle.
The down payment will depend on the type of loan you hope to get and where you plan to buy.
There are mortgages with a down payment as low as 3%, giving you opportunities to save up in a shorter period of time. You may have to pay for private mortgage insurance if you don’t put down 20%, however.
You have to think about other costs that you’ll need upfront money for to buy a home. These costs include closing fees and the costs of moving.
Open a Dedicated Down Payment Savings Account
After you've researched your mortgage options and figured out which one you'd like to end up getting, you can create a savings account. You will only use this account for your down payment.
So that you do not spend the money in it, it should be liquid and separate from anything else.
Deal with Debt
In order to save more money for a down payment, you must find ways to cut costs. One way to do that is to reduce your debt.
Do a balance transfer if you have a credit card balance with a high interest rate. You can transfer the expensive debt to a card with a zero-percent interest period.
If buying a house is your goal, try not to add any more debt during this time.
To qualify to get a mortgage, you’ll have to meet the debt-to-income requirement.
Find Ways to Cut Back
If you're paying a lot in rent, there's not much you can do unless you're willing to move unless you're willing to give things up.
It will be necessary for you to find other ways to reduce your costs. By skipping meals out, ordering food from home, or looking through your subscriptions, you might be able to save some money.
Think About Moving
We mentioned moving above, and you may not be willing or able to do it, but if you can, cutting down on what you’re paying for rent is one of the best ways to have more money to put toward a down payment.
It might be possible for you to renegotiate your lease with your landlord if you cannot move to a smaller or less expensive home, or you might get a roommate. If you can move, along with getting a smaller place, another option is to move outside of the center city area, if you live there currently. Typically, the further out you move from the central area of Albuquerque, the lower the rent.
Explore Assistance Programs
Finally, many mortgage lenders have programs and loans for first-time homebuyers that cover part or all of a down payment. There are also grants, which require you to complete a homebuyer education course before you get the financial assistance.
If you work in certain fields, like as a first responder or teacher, homebuying assistance programs are often available.
A lot of lenders are looking to reach out to underserved communities to help them make homeownership a reality, so make sure to explore everything that’s out there.
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