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Saving for a Down Payment Thumbnail

Saving for a Down Payment

Is now the right time for you to purchase a home? If you have decided it is, make sure you have enough saved for a down payment. Use the following tips to help create a solid plan for how to get there.

Set a Goal

Knowing how much you need for a down payment is the first step. A good way to do this is to get pre-approval for a mortgage. Remember to take a close look at the different mortgage options that are available. Traditionally, 20% is expected for a down payment, meaning you will need to save 20% of the amount of home you can afford. This is in addition to other expenses like closing costs. If that seems like too much, there are some options to put down a lower percentage, but paying for mortgage insurance will likely be the result. It’s not necessarily a bad way to go if your situation requires it, but it is a caveat to keep in mind.  

Stick To Your Budget

As soon as your savings goal is set, begin working towards it by making a personal budget. Figure out how much you are making and spending every month so you know how much you’re able to save. Do your best to identify the areas where you can cut back your spending. Once this is done, you can begin to plan out your savings each month and determine when you should have enough to take the next step in the home buying process.  

Automate Your Savings

It can sometimes take a long time to save a large amount of money. Making it automatic helps you to continue working towards your goal. When you automatically direct your monthly savings to a separate account, you eliminate the risk of spending the money and getting off track. You can create a separate savings account or checking account and set up an automatic transfer into it every time you get paid. Paying yourself first is the best way to think of it, and you will likely not even miss the money. Transferring it as soon as it hits your bank account makes it easier to pretend it was never there and helps you to continue saving.