Saving for a down payment might be easier than you think
You’re ready to buy a home but you’re wondering how you’ll scrape together enough money for a down payment. Well, here’s some good news: Coming up with that down payment isn’t as difficult as you might think.
You can qualify for several mortgages that require low down payments. For instance, you can take out an FHA loan with a down payment of just 3.5 percent if your three-digit credit score is 580 or higher. You might also qualify for Fannie Mae- or Freddie Mac-backed conventional loans with down payment requirements of just 3 percent of your home’s purchase price.
It’s true, though, that it’s financially savvy to put up as much of a down payment as you can. If you come up with a down payment of 20 percent of your home’s purchase price, for instance, you won’t have to pay for private mortgage insurance. And the bigger your down payment, the lower, in general, your mortgage’s interest rate will be.
So what do you do if you are aiming for that big down payment? It’s all about saving money over time, of course, so the earlier you start saving the better. A recent story by RealtyTimes does a good job outlining several tips for cobbling together your down payment money as quickly as possible.
The story suggests that you cancel your gym membership and work out of your home and that you reduce the number of streaming services that you subscribe to each month. RealtyTimes says you can save money by cooking for yourself and eating out less often or by brewing your coffee at home each morning instead of running into a Starbucks.
You might also turn down the heat at your home – within reason, of course – and pack your lunch before you head off to work.
These sound like simple steps. But they can add up to significant savings each month. If you work with the goal of building your down payment dollars and you reduce your extra spending? You might build up that down payment money much faster than expected.