Many renters in the San Francisco Bay area feel the push to save up money to buy a home as experts predict continued rent increases. According to an article by The San Francisco Business Times, the Bay Area saw the largest rent hikes in the U.S. in 2014 at about 13.5 percent. As people relocate to the Bay Area for tech jobs, the demand for housing remains fierce. Meanwhile, economists predict mortgage rates will start to climb. First-time homebuyers often save up for a new home, but so do repeat buyers. If you are selling your home in a less affluent city to relocate to San Francisco, you might also need to save up extra money for a down payment depending on the equity in your home.
It’s not difficult to save for a new home in the San Francisco Bay area if you are motivated. By sitting down with a new home builder in Northern California such as Trumark Homes you can figure out a budget. Many buyers gravitate to new construction so they don’t have to worry about renovation and repairs after they move in.
- Reduce your major expenses
According to the real estate website Zillow.com, one simple way to save up a lot of money for a down payment is to slash your largest expense. For most people, that means finding a way to drop your rent. Moving in with a roommate, downsizing or staying with family as you save up for a home can translate into tens of thousands in savings. Ask a relative or friend if you can do some work for them in lieu of rent until you can save up for your new home.
- Automate your savings
Another easy way to save extra money to buy a home is to set up an automated savings plan. After touring new model homes and getting pre-qualified for a mortgage, figure out how much money you need to save each month. Buying a new construction home can give you some extra time to save, depending on the timeline for construction.
- Stash tax refunds
Instead of spending cash windfalls such as tax refunds, rebates and small inheritances, funnel unexpected money into a new home savings account. Experts say it’s best to keep money for a down payment that you’ll need soon in a conservative, safe account as opposed to investing in stocks or risky investments.
- Suspend other savings goals
Because buying a home is a major investment for the future, some people temporarily suspend making contributions for retirement until they get settled in a new home. On the other hand, don’t give up a company match to a 401(k) since that’s free money. If necessary, you borrow a small amount from your 401(k) in a dire situation.
- Ask for what you want
Experts say a lot of millennials aren’t afraid to ask their parents or grandparents for help with a down payment on a new home. Older people, though, may feel somewhat embarrassed to ask for financial help from friends or family. In 2013, about 27 percent of first-time homebuyers did receive financial gifts in order to afford a home. Be creative by asking for financial gifts instead of wedding, birthday or holiday gifts.
- Tap a Roth IRA
Some home buyers forget they can tap their Roth IRA for a home purchase. You can take out any of the money you contributed without penalties or taxes. According to an article by Kiplinger, a first-time buyer can use $10,000 of the earnings from a Roth to buy a home without the 10 percent penalty. If you have had the Roth for 5 years or longer, you won’t have to pay taxes on the $10,000.
Living near the Silicon Valley is exciting, especially when you are a home owner. Saving up for a down payment on a home won’t take as long as you think if you know where to look and who to ask.
At Trumark Homes, we take the time to help home buyers prepare for the largest purchase of their lifetime. We are always finding vibrant new communities to develop in Northern and Southern California including progressive urban infill projects. For more information about our newest neighborhoods in the Bay Area, please contact us.