Saving for a Down Payment
| by Scott Bilker |
| Scott Bilker is the author of the best-selling books, "Talk Your Way Out of
Credit Card Debt", "Credit Card and Debt Management", and "How to be more Credit
Card and Debt Smart". He is also the Editor and publisher of the FREE DebtSmart®
E-mail Newsletter (http://www.debtsmart.com). Sign up today! |
 Scott,
How do you save money to buy a home
when you are swamped with credit card bills that just seem to suck
every last bit of savings?
--Darryl
Answer
Darryl,
I know exactly how you feel since I
was in that very same position at one time.
First of all you need to be sure that
your credit card interest rates are as low as possible. By
"low" I mean below 11.9%. There are many excellent
credit-card offers available from numerous banks, which make the
rates very competitive. Look through your junk mail and read the
fine print in some of those offers. Start using the 0% offers and
track the dates when they expire so you can be sure to transfer your
balance before the rate is increased.
Once you've minimized your interest
cost, you need to make saving for that house a priority. The way I
saved while paying my credit card bills was to make minimum
payments. That's right, it's one of those exceptions to the
pay-the-most-to-your-credit-cards-first rule.
In this case, to save for the down
payment of your house, you make the minimum payments to your credit
cards and bank the difference. The reason is that you need to save
your own money to use as a down payment; you cannot cash advance
money from your credit cards to buy a house. Well I guess,
technically you could, but most likely you won't be given a mortgage
if the bank learns that you’re buying a house with your credit
cards.
The strategy here is that you’re
going create extra money by paying less each month to your credit
cards. Many times banks will give you an opportunity to skip a
payment. That's the perfect time to save that extra payment in a
bank account toward your down payment.
Many people would criticize me for
suggesting that you pay less to your credit cards because you're
going to pay a little extra interest. However, this interest cost is
the fee you pay to be able to get the cash for the house. It was
worth it for me and everything turned out just fine.
Good luck and please let me know how
things go!
Scott
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