Purchasing a home is an exciting venture. However, if you aren’t prepared for the expenses, it can also be overwhelming. Understanding what payment you’ll require upfront will reduce the stress when it’s time to get a mortgage. The following guide outlines why saving as much as possible for a down payment is essential and how to meet your goals.
Why Should You Increase Your Down Payment?
For most buyers, it’s a requirement to put money down to originate a mortgage. If you get a conventional loan, you may be required to put down anywhere from 3.5% to 5% of the home’s total price.
However, it’s best to pay at least 20%, regardless of your loan type. If you put down less than this amount, you’ll have to pay for mortgage insurance, which will increase the annual cost of your mortgage. The higher your down payment, the lower your monthly costs.
Jumbo loans traditionally require at least 20% down payments.
What Are Some Ways to Save for a Down Payment?
First, you need to determine how much you plan on spending on your future home. This will give you a range from which to calculate how much 20% of the house value would be. Once you have a goal, start making tweaks to your everyday life to save money.
For example, create an outline of all your current monthly expenses. An easy way to do this is by checking your credit card statement, which breaks down expenses by type. From here, determine which areas you can cut back on. For example, if you spend a lot on clothing, try buying items at consignment shops instead.
You can also create a high-yield savings account that will accrue interest. Every time you get paid, move a portion of your paycheck to that savings account. You should also add any supplemental income into this account, such as bonuses from work, money from side jobs, or gifts from family members.
If you’re saving for a mortgage, turn to Dan Main in O’Fallon, MO. With more than 20 years of experience, this mortgage banker has the insight, expertise, and knowledge needed to help you secure the property of your dreams. Call (636) 284-4144 to discuss your needs, and visit his website to schedule a consultation.
Dan Main: NMLS # 502036
Flat Branch Mortgage Inc: Missouri NMLS #18-1713, Colorado 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.