Saving For A Down Payment

Making the decision to purchase a new home is exciting but with that decision comes the financial pressure to save up for a down payment. How can you save more money? How much do you need to put down?

If you’ve ever bought a home or thought of buying a home you have probably spent some time thinking about the down payment. A down payment is one of the factors of purchasing a home that makes it impossible for many people. Putting down a large chunk of money at once is difficult especially when you already have bills to pay and mouths to feed.

So how can you effectively save for a down payment and how much do you need to save?

How Much Do You Pay?

The amount of money you put down when you buy a home varies depending on the price of the home and the loan you are using to purchase it. If you are getting a typical mortgage you will likely have to pay 10-20 percent of the total cost up front as the down payment. So if you buy a home for $300,000 you will likely have to pay at least $30,000 up front.

If you are purchasing a home through a different program like one from the USDA, Veterans Affairs, or Federal Housing Administration you may not have to make a down payment at all or only around 3.5 percent.

How Do You Start Saving?

Saving up tens of thousands of dollars for a down payment can be tough for many, especially first time homebuyers who do not have equity in a home already.

The first step is to analyze your current financial situation including your income, expenses and what you already have in your savings.

The second step is to look at homes and prices in the area you would like to move and get a feel for how much you will have to save. There is a big difference between having to save $30,000 and $70,000! You want to know what you are in for.

After that you have to put yourself on a budget and create a savings timeline. How much can you spare to save right now? Extrapolating out how long will it take to meet your goal with that amount being saved every month? It may take a while. Think about the timeline and what you can do to cut back or add more money to that account.

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