What To Keep in Mind If You’re Saving for A Down Payment

Deciding to buy a home is momentous—after all, a house is likely one of the most significant purchases you will make in your life. Buying a home can positively impact your quality of life, but first you need to save that all-important down payment. Here are a few things to keep in mind when you’re saving up for a house.

Money saving tips

If you’re looking to level up your savings, set weekly or monthly goals, or just save faster, these savings tips can help:

·         Create a budget: A well-thought-out budget will help you get the most out of your income. You can use a budgeting app to track your income and expenses so you can see how much money you have available to put towards savings each month.

·         Automate your savings: This means setting up a direct deposit from your paycheck into your savings account so you automatically save a certain amount each month. Automating your savings can help to ensure you’re taking the necessary steps to reach your goal.

·         Cut back on expenses: Many people who are saving for a down payment cut back on some leisure expenses, such as eating out and entertainment. Look at your budget and see where you wouldn’t mind cutting back. Maybe you can eat out less often or cancel one or two streaming subscriptions you’re not using.

·         Save your windfalls: Whenever you receive any extra money—whether it’s from a bonus at work or a tax refund—consider adding all or some of it towards your down payment savings goal.

Understand how much your down payment should be

If your down payment is 20 percent or more, you can typically avoid paying for private mortgage insurance (PMI). A larger down payment can also mean smaller monthly payments, as you’ll owe less principal.  However, that doesn’t mean that you can’t buy a house with a down payment of less than 20 percent. Minimum down payments may depend on the type of mortgage you apply for. Certain mortgages for veterans have no down payment requirement at all. Others may require as little as three percent.

If you would like more guidance on what down payment you should aim for, talking to a lender can be helpful. They can tell you the required down payment. They can also provide guidance on monthly payment amounts you could expect based on different lending options.

Prepare for homeownership

Homeowners may face considerations that renters don’t. The house you purchase may require repairs. There may be homeowners association fees to pay or regulations to comply with. There’s a lot that homeowners need to think about while buying a house, especially for the first time. First -time home buyers might consider life insurance to help reduce the financial burden on their partner or family members, should they pass away unexpectedly. A term life insurance policy that lasts 20 or 30 years can cover you for the length of the mortgage. If anything happens, your surviving family or heirs can use the death benefit to continue paying the mortgage.

Take advantage of down payment grants

The government offers some down payment assistance to first-time home buyers who qualify. Down payment grants and programs are offered at the federal, state, and local levels.

If you're a first-time home buyer, consider visiting the U.S. Department of Housing and Urban Development's (HUD) website for a list of programs that you can apply to. You can also reach out to your local or state housing authority for a list of grants and programs offered. Local non-profits may also have assistance programs worth exploring.  Bear in mind that there may be eligibility criteria for income or location—look into any terms and conditions closely before applying.