Buying a home is a big step in life and a significant commitment. Most of us will need to secure financing, working with a Utah mortgage broker, to purchase a new home. For this step, a majority of programs require a down payment. A down payment for a home loan is the amount, in percentage, that you need to pay towards the total price of your desired home. With the right planning and realistic expectations, you can have the money you need for the down payment on for your new home.
Planning for Your House Down Payment
The planning stage of the home buying process starts with a pen and a paper. Write down your net monthly income and start subtracting your fixed living expenses (rent, insurances, utilities, etc.) and continue to deduct your variable living expenses (gas, credit card, food, clothing, entertainment, etc.). The primary factor to keep in mind when planning to save for your house is to be realistic with your household expenses. Consider family, kids, and unexpected expenses. Your total expenses should be within 35-50% of your total income. This figure would help you to have enough money left to start putting in a savings account.
One thing that you should also keep in mind is that saving money takes time, commitment, patience, focus, and discipline. Getting together with a mortgage specialist from the beginning is crucial in the planning stage of your home buying process. a mortgage loan officer can help you figure out the amount you will need for your down payment according to the type of loan you qualify.
How Much to Save for Down Payment?
Once your mortgage specialist tells you the total amount you will need, you will have a more exact idea of the time needed to save the money and the amount of money you will need to put in your savings monthly. It is a common myth that it is required to put 20% down, that is not accurate and most homebuyers put down much less.
However, according to Zillow, 55 percent of homebuyers put less than 20% down when getting a home loan. There are many programs that allow for no to little down payment if you meet the criteria for these loan types:
VA Mortgage Loan (Veterans Affairs) - 0%
USDA Loan (Rural Housing Development) - 0%
FHA Loan - 3.5%
Conventional Loan - 3%
Outside of these types of loans, there are some states and local programs that can also help with your down payment. Another reason why it is so important to have a mortgage consultant by your side from the beginning.
Some Options to Save Money
Sometimes, homebuyers will opt for borrowing from their retirement, receiving gift money from family members, sell stocks or investments, or using proceeds from an earlier home sale. However, if you plan to do it the old-fashion way, by saving money monthly, here are a few tips:
Transfer a stipulated amount of money every month from your bank account into your savings account. You can even ask your bank to do it for you.
Skip your vacation for a year and save what you would have spent on it to your savings.
Lower your variable expenses which are food, gasoline, entertainment, etc. You will be amazed how much money you can save.
Stay away from paying for things with your credit cards. Pay them down or off and after that call your credit cards companies for a better interest rate.
Working overtime or a second job for a while can help you find the extra money to save.
Saving for a down payment is not always easy or quick, but will prove to be worth it. For additional advice please contact us at 801.272.0600.