Saving for your down payment is one of the most difficult and important steps to homeownership. Without a solid down payment, you may be forced to pay mortgage insurance, which raises the cost of your loan considerably. In some cases, not having enough money for the down payment may prevent you from qualifying for the loan at all. Follow the tips below to save up for your down payment and move closer to buying the home of your dreams.
1. Know how much you will need.
Although some loans will allow for a much smaller down payment, the standard down payment amount required to avoid mortgage insurance on a conventional loan is 20 percent of the purchase price. To calculate this amount, simply multiply your estimated purchase price by 0.2. For example, if you hope to buy a home for 200,000, a 20 percent down payment would be $40,000.
2. Set up a savings account.
Open a savings account so that you can separate the money you are saving from the money you spend on everyday expenses. This will reduce your temptation to spend the extra money before you buy your home.
3. Curb your spending.
Cut back on unnecessary spending as much as possible. For example, you may decide to trim down your data plan, select a smaller cable package and/or stop going out to eat until you have saved the money you need. Calculate the amount of money you are able to exclude from your regular budget and transfer this amount to your savings account every month.
4. Ask about down payment assistance.
Certain mortgage programs offer down payment assistance to qualifying borrowers. If you are having trouble saving the money you need for a down payment, or if you are in a hurry to buy a home, contact Starboard Financial to inquire about down payment assistance.
Acquiring a down payment is just the first of several steps to homeownership, but you can’t move forward without it. Contact Starboard Financial today for more information about mortgage requirements or to begin your application.