Purchasing a home is likely the biggest purchase you will make in your lifetime. This is a big decision and big decisions warrant a good plan. A down payment is very important in the home-buying process because it affects things like your interest rates, loan amount and monthly mortgage payment.
Obviously a down payment has to be reasonable, but planning months or even years ahead will allow your savings and your down payment to grow and thus, you will spend less money in the long run. In order to save you money, we’ve compiled the steps you need to take to save for your down payment.
Do the Math
A down payment can range anywhere from 3.5% to 20% of the purchase price of the home. The very first thing you should do is sit down with a real estate agent and explain what you’re looking for and how much you can afford. Before you do so, make sure to know how much you want to put down and how long it will take you to get there.
Figure out what percentage of your monthly income you can realistically put towards this down payment and be consistent about it.
Speak with a Credit Union
After you’ve gotten most of the numbers ironed out, you should visit a credit union to research your home loan options. These representatives are the best sources for making informed decisions on how much of a loan you will need. They can also help you understand further how to save and what you can realistically afford.
Make a budget
The first step to a successful budget is to collect data on your own spending habits for the past few months. Collect information like where you spend most of your money, how much you typically have left at the end of the month and how much you already are committing to a savings account.
Using money management apps like Mint, The Birdy or your credit union may offer a personal financial management app that can not only assist you in collecting your spending information, but it can help you save by putting your income and expenses right at your fingertips.
Set automated savings
This is where a money management app comes in handy. Having all of your monthly bills in one streamlined place makes it much easier to monitor when your money is moving around. With automated savings, you can forget about manually moving your money from account to account and instead watch your savings grow automatically. Don’t forget to research your own spending habits and make a realistic budget before setting any automatic withdrawals.
Be flexible
Budgets are of course incredibly important, but it’s also important to be flexible with yourself. If you know that your best friend’s birthday is coming up and you want to splurge on a gift – let yourself use your money for what you want but pull it from another monthly luxury. If you want to get serious about saving, you have to get serious about spending.
Using these tips and sticking to a plan will ensure that you’ll soon be in the house of your dreams!
If you are interested in learning more about how we can help, please visit our website, give us a call at 800-835-3400, or stop by a branch to talk to a Home Ownership Advisor. We are here to help you on your financial journey.