Coming Up With Ways To Maximize Your Down Payment

January 5, 2023

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After a year of skyrocketing home prices and high interest rates, many potential homebuyers who spent years saving up for a down payment have put their dreams of owning a home on hold. While many remain on the sidelines waiting for conditions to improve, when it comes to getting the most out those savings, there may be no better time than the present to act.

In today’s market, there are many smart options when it comes to maximizing your down payment and ensuring your money is working for you while you wait for a better time to buy. However, choosing the best route based on your short and long-term plans can be confusing. That’s where BayFirst comes in.

Our investing and saving professionals are here to help you get a leg up by leveraging your untouched down payment with the following tips:
  • Seek out the best savings account. Not all savings accounts are created equal, so if you have your down payment sitting in a basic account, you could be missing out on a great deal of interest, especially if you live in Florida where rates are being driven up by demand. Instead, consider a:
    • Money Market Account (MMA) or High Yield Savings Account: Both can allow you to save while earning a competitive annual percentage yield (APY) and provide access to your money without penalties in the event the market changes. Just remember, these accounts are typically variable, which means your APY will vary based on market conditions, and they come with rules, including minimum initial deposits, minimum balance requirements, and transaction limits. They are also Federal Deposit Insurance Corporation (FDIC)-insured, so your money is safe. Learn more here.
    • Certificate of Deposit (CD): Though they typically provide a higher APY than money market accounts, CDs have a fixed rate which means you lock in your interest rate when you open, which decreases the risk. Term length can be as short as six months but also up to five years, however these accounts don’t allow easy access to your money until your term ends. They are, however, also FDIC insured. Learn more here.
  • Don’t stop saving. Wherever you keep your savings and even though you’ve reached your down payment goal, it’s best to continue stashing cash away to increase your down payment and ultimately minimize your monthly mortgage payments when you finally buy. Experts recommend you save at least 10% of each paycheck regardless of how much you have in savings already.
  • Consider paying down debt. If you have debt, consider having a loan officer look over your debt-to-income ratio as it might benefit you to pay it off with some of your savings to improve your borrowing power and/or your credit score, putting you in the best position possible when the time comes to buy.
  • Remember your retirement. If you’ve your satisfied with your down payment and looking for other smart moves to make with your future savings, it could be smart to put them toward other important goals, such as your retirement. Be sure to talk to a licensed banker about:
    • Opening an Individual Retirement Account: IRAs are savings accounts with tax advantages that assist with saving and investing in the long term. They can be opened at any age and grow tax-free until the account holder retires.
    • Contributing more to your 401k match. If your employer offers a traditional 401(k) plan and you're eligible, you may be able to contribute pretax money, which can be a significant benefit down the line. And, if your employer offers to match your 401(k) plan contributions, be sure you are contributing at least enough to take full advantage.
  • Protect the strength of your credit score. The higher your credit score, the lower your mortgage rate will be after your home purchase. Talk to a mortgage professional now about what score is needed for their best rate, and you’ll have something to shoot for while you wait.
If homeownership is a milestone that has been delayed for you because of current market conditions, now is the time to consider how you can make that untouched down payment and future savings work for best you. And if you need help, our team is standing by to answer questions, provide expert advice, and ultimately ensure you remain on track to get into the home of your dreams when the time is right. Call us today, fill out the form below, or stop by to get started. Because regardless of where you are in your journey to homeownership, smart saving is always the key.

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