Make no mistake: your house will likely be the biggest purchase you make in your entire life. Furthermore, if you’re like many people, your first house will be your only house for the rest of your life.
One of the early steps in this process, which can and should begin long before you even start shopping for homes, is saving for a down payment.
But how much should a person save for a house down payment? What are the best saving strategies to ensure you have enough money for your other needs?
In this guide, we will answer the above questions and more to ensure you know everything you need to know with regards to your house down payment.
The 20% Rule
If you ask most people who work in the housing and mortgage industry, they will advise you that you should save at least 20% of the home’s value for your down payment. This is standard advice and generally considered to be a sound strategy when it comes to home buying.
While there are some rare instances where a person might be able to make a down payment of less than 20%, this is not advisable as it will likely result in a much higher mortgage rate and significant losses in money over time.
Save Unexpected Earnings Immediately
When you get a raise or receive an inheritance, it’s very tempting to spend the money on something you don’t need. But don’t let a fun vacation for the family or a shiny new toy distract you from the goal: buying a new home. There will be time for those fun purchases later in life. If you’re serious about buying a home, you need to save all of your extra money for the down payment.
Create an Effective Budget
You have bills and costs in your life that need to be taken care of. Auto loans, electricity bills, and the like all need to be paid each month. However, you should create a defined list of every cost you have in your life. This way, you can know exactly how much you have leftover to save for your down payment.
Allow Yourself Some Room for Having Fun
While it is important to save as much as you possibly can, you don’t need to stay inside and never spend a dime while you’re going through the home buying process. Taking the family out for ice cream or going on a short day trip are great ways to relax without breaking the bank or cutting into your down payment savings. It’s important to remember that there are other important things in life besides the down payment in question.
Work with a Mortgage Professional
A mortgage professional can help you stay on track as you save for your house down payment. Furthermore, these mortgage experts know what to expect and can advise you with any questions or concerns that may arise throughout the process.
If you’re ready to start your homebuying process, contact a mortgage professional today!
