Saving Money for a Down Payment on Your Home
Whether homeownership is a long-term or short-term goal, it is only attainable if you have a sufficient down payment saved. Your down payment will depend on the price of the home you hope to purchase as well as how much you can afford to pay in monthly mortgage payments. Most sellers and lenders prefer that a down payment be 20-percent of the cost of the home; however that is not always necessary to qualify for a mortgage. Here are three steps to help you save for your down payment and closing fees more quickly.
Establish an Amount.
It can be difficult to save money without a set goal. So establish an amount at the outset, determine how much you will need to put away each month, and figure out how long it will take to reach your goal. This will require you to have an idea of how much you plan to spend on a home. Then you can use an online mortgage calculator to estimate how much your monthly mortgage payment would be based on the purchase price, down payment, loan term, and current interest rate.
If you cannot afford to put down 20 percent, you may have the option of applying for a home loan with a personal mortgage insurance (PMI) premium. While this will increase the amount of your monthly mortgage payment for a set period, it may be worth it considering it will allow you to purchase a home much sooner than you could otherwise.
Stick to a Budget.
Once you have a clear-cut goal, it’s time to establish a budget. Start by factoring in your total monthly income and then subtract all your monthly expenses, including rent, bills, loan payments, food, and entertainment. This is a good time to scale back unnecessary and indulgent purchases such as excess clothing, travel and entertainment. Any money that remains after subtracting necessary monthly expenses should go into your long-term savings account toward your down payment. If you are not currently paying rent and your budget allows, it’s a good idea to put away at least as much as your estimated future mortgage payment. Doing so will make it easier once you become a homeowner.
Find Ways to Make Extra Money.
Bringing in additional income will allow you to put more money to your down payment savings. It may not be easy to take an additional part-time job or sell your unnecessary belongings, but it will go a long way to helping you expeditiously arrive at your monetary goal. If home ownership is truly important to you, the extra hard work and sacrifice will be well worth it in the end.
For more financial tips, visit the Cliffco Mortgage Bankers Know-How Center today.