Even with a mortgage, buying a home requires a sizable cash down payment. While many first-time homebuyers may not have this amount of money sitting in their bank account, following a smart savings strategy can help build these funds in a timely fashion. If you’re looking to become a homeowner, here are five steps for first-time homebuyers to save for a down payment.

5 Steps to Save Up for a Down Payment 

1. Clarify Your Targets

After you determine the home price that fits into your budget, aim to save anywhere between 7% and 20% for the down payment. The higher your down payment, the less of a risk you’ll present to lenders, which may help you save on interest rate costs. However, if you’re a first-time homebuyer, there may be special lending opportunities that can lower your down payment requirements.

2. Consider Options to Lower Your Down Payment Requirement

VA loans help military service members secure a low-interest mortgage with no down payment. Others can apply for an FHA loan—a financing option that offers low-interest rates and a 3.5% down payment requirement to those with low credit scores. The Missouri Housing Development Commission also offers a down payment assistance program for first-time homebuyers. Through this program, you may be able to secure a small second mortgage to cover the down payment and closing costs.  

3. Open a High-Interest Savings Account

Standard savings accounts may only offer interests as low as .01%, making it virtually impossible for you to build your funds by leaving them untouched. As such, it’s better to find a high-yield savings account—such as those that offer 2.35% APR and beyond.

4. Make Regularly-Scheduled Deposits

Take your total savings goal and divide it by the number of months you feel comfortable waiting to buy a home. Use this amount to schedule automatic deposits to your savings account every month. For example, if you want to put down $10,000 in 10 months, you’ll need to schedule monthly automatic deposits of $1000.

5. Minimize Debt

While it’s important to divert your income to your down payment savings account, it’s also smart to use funds to minimize your overall debt. Doing so will help improve your credit score, which can make it easier to secure a mortgage. By paying off debt, you’ll also have more available cash to spend on homeowner expenses.

Providing lending support for over 20 years, Dan Main is a leading resource for first-time homebuyers in Saint Peters, MO. Through one-on-one assistance, this loan officer will introduce you to financially-sound options that can help you buy property without overburdening your budget—including FHA loans and down payment assistance programs. Understanding that a home purchase is a major investment, Main aims to provide reliable support in an efficient, yet cost-effective fashion. Visit this specialist online to learn more about these services or call (636) 284-4144 to schedule a convenient consultation.

Dan Main: NMLS # 502036
Flat Branch Home Loans NMLS # 224149
947 Waterbury Falls Dr
O’Fallon, MO 63368
This is for informational purposes only and not an offer to lend or extend credit.