Tips for Saving for a Down Payment for a Mortgage
Buying a home is typically the largest single purchase a person will make in his or her lifetime. When you are preparing to make a big purchase in real estate, it is important to understand the complexities of what you can afford, what everything will cost, and how to prepare for your purchase.
Before you start looking at homes, your first step is deciding what you can afford and what you want from a home. List your basic requirements such as location, size, and other features.
Then, you will need to save for a down payment for your home.
Different mortgage programs require different amounts for a down payment. If you qualify for a FHA home loan, you can purchase a house with 3.5% down. In addition, many other mortgage programs allow a down payment as low as 5% of the purchase price of the home.
If you are financially able to put 20% down, it can be beneficial. Lenders will not require you to purchase Private Mortgage Insurance (PMI). PMI is an additional cost built into your mortgage that protects the lender in the event of a default.
Here are some tips to help you save for your down payment:
- Pay yourself first. Make saving a priority by setting aside a certain amount each month.
- Consider having money automatically transferred in your savings account each month. If you never see the money, you are less likely to miss it.
- Cut back on your Spending. Choose one item to give up or cut back on and put that money in the bank. This item could be a drink, which is a small expense that tends to add up quickly.
- If you have the option, consider working overtime and add that money to your savings.
- Get a second job or do freelance work to earn more money.
- Sell stuff on eBay. eBay is the ideal place to offload your unwanted household items in return for money. You can convert your clutter into cash.
- Eliminate the luxuries. For example, put your cable television subscription on hold. Take your lunch to work every single day. Don’t go shopping for new clothes.
Over a period of twelve months, you could easily save a few thousand dollars.