During home-buying, offering a substantial down payment can save you lots of cash. Even if you plan to buy your home in five years, you need to start saving early for the down payment so that you can make small monthly payments for your mortgage. You can make minor adjustments to your lifestyle as you contribute a particular amount to your down payment every month.
It is essential to figure out how much money you need to save as the down payment. Go through mortgage financing directory and choose the right lender for your loan. Sit down with them and find out how much mortgage you are eligible for. You housing expense should not be more than 28% of your monthly income.
A mortgage lender can help you find out the exact amount you should save for the down payment by making the necessary calculations according to your financial situation. In most cases, you need to offer 20% as the down payment when buying a home. Though this is not mandatory, having the amount can help you get the best mortgage deals.
Determine the timeframe. Knowing how much time you have to save for the down payment helps you remain on the right track. If you don’t have sufficient time, then you should contribute large amounts every month for you to meet your goal. You then need to find the best ways for you to start saving for your home. Open a savings account that you will not use for any other need and dedicate it to the down payment. Work with a target and divide the total amount you want to save with the number of months you have.
Make sure that you contribute an amount to the down payment account every month by setting automatic deposits. Allocate a precise percentage of your income to go direct to the account. This helps you eliminate the temptation to use all your salary on other expenses. Revaluate your budget and make room for the down payment. Since you have to save a substantial amount, your budget should be able to accommodate your new goal. This means that you may have to get an extra source of income from working two jobs or investing in a hobby.
You can also reduce some of the expenses. If you had vacation plans, postpone them until you have saved enough for the down payment. As you work hard to save, consider reducing your debt. If you have credit card payments that come with high interest, you need to clear them. The debt can harm your credit score and make it hard for you to get a mortgage. The sooner you pay off bad debts, the more money you can free for your down payment account. Ensure you bank windfalls. If you receive any tax refunds, bonuses or commission checks, deposit them in your down payment account. This can help you buy your home sooner than you expected.