If you’ve been thinking about becoming a homeowner, one of the best first steps you can take is to start saving now for your down payment. Coming up with a down payment is one of the biggest obstacles homebuyers can face, but you can make the journey as easy as possible by having that down payment ready when you’re ready to begin shopping.
What is a down payment?
A down payment is the amount of money, out of your own savings, you put toward the purchase of your home. Typically, a down payment is combined with a mortgage loan to help reach a home’s total purchase price. The more money you can put toward your down payment, the smaller the loan you’ll need; the smaller the loan, the smaller your monthly payments will be.
How much do I have to save?
Depending on the type of mortgage loan you are taking out and other factors, such as your credit score, the amount of a down payment will vary. Typically, you can expect to find down payments in the range of 3% – 20% of the purchase price of your new home. A Day Air Home Loan Specialist can assist you with finding the perfect amount to put down.
5 Keys to Saving for Your Down Payment
Following these keys to saving can get you closer to the keys of your new home.
- Create a budget and timeline. First, decide how much you want to save for your down payment. Then, create a household budget and calculate how much you can comfortably save each month to help you reach that goal.
- Open a separate down payment savings account. Use this account exclusively for savings toward your down payment. Also, it’s a good idea to make your monthly contributions automatic. People find they’re less likely to dip into this money when they’re light on cash if they keep it in a separate account.
- Reduce major monthly expenses. Chances are, if you shop around and compare rates on expenses like insurance, Internet and cell phone plans, you can find deals or promotions that allow you to save hundreds of dollars per month – savings you can put into your down payment fund!
- Monitor spending. With online banking, you can see where most of your discretionary income is going and easily identify areas where you can cut back. Put the extra money you save into your down payment fund.
- Track your progress. Saving over a long period of time and staying focused on the goal can be a challenge. So keeping your progress in front of you (create a chart or log) can give your motivation a much-needed boost if thoughts like “we’ll never get there” start to creep in.
While everyone’s situation is unique, we think following these five steps can help you get closer to realizing your dream of home ownership. If you’d like more tips on saving for your down payment or have any questions about buying your home, talk to a Day Air Credit Union Home Loan Specialist today!