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Homebuilders want to help you save money-so you can buy a house.

Say hello to your new best friend and personal finance coach: your homebuilder.

"No money down" mortgage loans have gone out of style, like granny dresses and pet rocks. Homebuilders are scrambling to come up with new ways to put their inventory into the hands of consumers, so they're borrowing an idea from department stores. If layaway plans work for lawnmowers and evening wear, why not for real estate?

Basics of homeowner layaway

The down payment layaway idea for a new home purchase is both simple and elegant: sign a purchase agreement, and start saving up cash. When the escrow account holds enough to cover closing costs and the down payment, the builder will start constructing your new house. Or, if you picked out a pre-built model from existing inventory, you can sign the closing papers and pick up the key.

The builder will help you come up with a savings plan, set up the escrow account, and give you incentives for meeting your goals. Finish on time, and you might get a price break on the property, kitchen upgrades, or a better landscaping package. They'll even send you reminders to make those payments. While it's not really a monthly bill, those payment slips can help you overcome years of imperfect savings habits.

Builders taking action

These builders aren't coming up with these programs out of some philanthropic desire to help you out. The homebuilding industry is pulling out all the stops to get buyers back into their open-house models, and then hopefully into a new home. With the mortgage side of the equation tightening up recently, it takes some creative thinking to come up with new incentives that actually work.

At least three of the largest homebuilders in the nation are setting up layaway programs right now, and you can expect more to come if they work. For some, it's a great way to start a savings habit.

New home purchase negatives

If you have the intestinal fortitude to set up a savings plan on your own, feel free to save first and buy a home later. Time-honored tradition is on your side, and you'll get to set up the perfect savings plan for you, with no pressure to conform to the expectations of a large corporation with a vested interest in your progress.

If you start a layaway program, but then cancel the contract, you could lose the partial down payment you had amassed, just like you would if breaking a regular purchase agreement. Escrow accounts rarely carry interest, which works against the whole "saving up" plan. And, if there ever were a buyer's market in American real estate, this would be it. Sellers and homebuilders are falling all over themselves to please potential buyers, and chances are that your dream home-or something just as nice-will still be available in a few months when you can afford the down payment.

Published on January 6, 2008