An easy way to prepare for owning a home is by saving for a down payment. You can start saving with a couple of simple methods. If you’re saving already, you can build on it even more.
What Is Required?
The required down payment amount varies with the price of the home and what type of loan you have. It can range from 3.5% to 20% of the home’s purchase price. The higher down payment you make, the smaller the loan you’ll need and you’ll pay less interest over the length of the loan. Use our Mortgage Calculator to calculate your total interest payment. With a 20% contribution, you won’t have private mortgage insurance added to your monthly payments.
Talk To A Lender
Talk with a lender about how your financial situation could qualify for a loan. They can evaluate your resources to help you pursue opportunities whenever you are ready.
Start A Savings Account
Starting a savings account exclusively for a down payment is an effective way to build a down payment. Always keep it isolated away from your personal checking account. Label it “Down Payment” to help remember its purpose.
Also, add funds for extra loan fees and costs, buying new appliances, furniture and moving expenses. Have the bank transfer a small amount from another account into your down payment account automatically.
Test Drive A Payment
Test drive a loan payment by asking your lender to estimate what your mortgage payment might be for the kind of home you want. Use our Mortgage Calculator to calculate your monthly principal and interest. Include taxes, and insurance, utilities and possible maintenance. Subtract that total from your rent. Then, save the difference. This shows what finances you’ll need to own your home. For example:
Principal and Interest – $1200
Taxes, Insurance, Utilities and Maintenance – $350
Rent – $900.
Difference is $650
Save $650
Here are several ways banks can help grow your savings with higher interest rates:
1. Certificates of Deposit or (CD) – May yield a greater rate of return than a money market account. Check out our CD Rates.
2. Money Market Accounts – A high yield Savings Account. Check out our Money Market Accounts rates.
3. Savings Accounts – Check out our Savings Accounts rates.
