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How to Save Money to Purchase a Condominium

By Mike in Home Buying Tips with 0 Comments

For most of 2017, San Diego has been a red-hot real estate market, particularly for owners of condominium units located in the downtown districts. What this means for prospective buyers is that they can expect to pay more as they get into bidding wars with other would-be buyers. Market conditions should not dissuade you from purchasing a condo for sale in downtown San Diego. If you need to save money for the down payment and closing costs, here are some recommendations for you to follow.

Determine How Much You Should Save

If you have $50,000 in the bank and are interested in East Village San Diego condos going for $379K, you should increase your savings to $80K for various reasons. By putting down 20 percent of the purchase price, you increase your chances of getting approved for low-interest financing without private mortgage insurance. The rest of the money goes toward prepaid items such as homeowners insurance and condo association fees. Moreover, you will likely be required to show you have three months of household expenses saved up as cash reserves. By striving to save up this 20 percent, you can close with a loan-to-value ratio higher than 80 percent if market conditions urge you to do so.

Isolate a Savings Account

You are better off setting aside a bank account that serves the sole purpose of keeping the funds you are saving toward your condo purchase. Draft a budget and figure out a way to transfer money directly from your paycheck to this account, which you should not withdraw from unless the mortgage lender instructs you to do so prior to closing.

Earn Interest

The Federal Reserve intends to raise interest rates in December 2017, and it may do so again during the first quarter of 2018. If you have a target date to purchase your condo a few months down the line, you may want to look into a three-month certificate of deposit with a “bump-up” feature that increases your rate of return when the Federal Reserve votes to increase the prime rate of lending.

Cut Down on Expenses

Cutting down on monthly expenses is always easier said than done, but it happens to be very effective. Think about the things you can realistically live without. For example, you could save more than $250 over three months if you eliminate your daily cup of Starbucks. Cooking and eating at home is another strategy that allows you to save up even faster.

Maximize Your Earning Potential

Freelance work and taking on as much overtime as possible can help you reach your financial goals, but you don’t have to be alone in this endeavor. If your partner or one of your relatives will occupy the condo, he or she should also consider maximizing his or her income.

You’ll need to make these same financial considerations if you’re interested in lofts in Columbia District or penthouses in Little Italy. San Diego has many wonderful properties on the market right now. Get in touch with one of the trusted agents at 92101 Urban Living to see what’s currently available. Call 619-649-0368. ')}