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Anna Cuevas is the National Urban League's new Consumer Advocate, as part of our 2015 Financial Empowerment series. Learn more about Anna here.
Last week, Anna asked Should You Rent or Buy, and Why? She follows it up this week with another look at homeownership and how couples can make that dream a reality, just in time for Valentine's Day!
Homeownership is a central goal for many couples today. A recent study by ERA Real Estate shows that couples believe that buying a home is more important to their relationship than other big ticket purchases, like a pricey diamond engagement ring or a paradise honeymoon. Not only do they think of buying a home as a sound financial investment, but also an investment in their long-term relationship. In other words, it's about more than purchasing a house—it's a commitment to their future together.
To achieve their goal of homeownership, couples must make some sacrifices in order to save enough for a down payment. Here are a few ways to turn the dream of homeownership into reality:
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Reduce bills and expenditures. Saving money is easier when you have fewer bills to pay. Suggestions include cutting back on entertainment, dining out, cable, or phone plans. Selling or trading in a car for a less expensive model or different mode of transportation is also an option. This does take commitment, and both parties must agree on the best ways to save costs. A monthly budget and spending log will help couples identify ar
eas where they can curb costs.
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Borrow money from family or friends. Some couples have access to family members or good friends who may be able to assist with their down payment. This support could come in the form of a gift or a loan. If you're willing to ask for and receive financial help, make sure the transaction is in writing and outlines repayment terms. Also, ensure that the transaction is documented—it's highly likely that a lender will ask where you received the lump sum.
- Borrow money from a retirement plan or 401k. Couples who are anxious to purchase a home may decide to borrow the down payment from their 401k. However, consider the restrictions before you jump into that avenue. Most retirement plans have limits on the amount that can be withdrawn, and you'll have to repay the loan while you're making mortgage payments. In addition, be aware of any taxes or penalties you may have to pay on the withdrawal. And don't forget that when you withdraw money from your 401k, that money stops losing interest, which will cost you money.
These are just a few adjustments couples are willing to make in order to own a home. After the wedding, the first home together is the biggest purchase and one of the most popular goals for newlyweds. Explore your options and work together to save the money you need to build your down payment and make an investment in your future. Remember that it's not just about buying a house—it's about creating a home.
