Buying a home is an exciting experience. As the biggest purchase you’ll most likely ever make, you’ll be officially stepping into adulthood with a place and a property of your own. Unfortunately, a lot of work — and saving — goes into buying a house; you’ve got to compare types of loans and mortgage rates, decide what type of home loans you’re interested in (and whether you’re going to go through a mortgage broker or a bank), and ensure your credit score is up to snuff. Finally, you need to make sure you have enough money saved to actually afford this home. Let’s take a look at some tips that will help you save for that mortgage downpayment.
Determine What You’ll Need To Save
The average mortgage downpayment in 2017 was $12,829, but that number changes depending on the overall cost of the home. Traditionally, it’s best to put down 20% of the home’s cost; if you’re buying a $200,000 home, expect to have $40,000 to hand over for the downpayment. Of course, this is a recommendation, not a rule; your broker or lender will be able to help you figure out what’s best given the situation. Remember: the more you’re able to put down, the less you’ll have to pay in the long run!
Establish Your Timeframe
It isn’t very realistic to expect to save that kind of money in a year or two; create a multi-year plan to give yourself enough time to be able to save up without sacrificing daily essentials. If you want to buy your $200,000 home in four years, you’ll need to put away $8,000 a year to get to that final $40,000 goal. It’s vital that you not rush this step — or purchase a house that you can’t afford. If your monthly mortgage payments after your downpayment exceed 28% of your stable monthly income, you need to start looking at more affordable options.
Make Room In Your Budget
Saving thousands of dollars per year doesn’t happen simply by cutting out fast food purchases; you’ll need to clear some serious space in your budget to make sure your savings goal is possible. You can either earn additional income, do some cutting back on all expenses, or some form of both. This has the added benefit of teaching you how to live with monthly mortgage payments before they begin, so embrace the experience for all its worth!
