How Do People Save Enough for a Down Payment?

Saving up for a down payment can be tricky – we’re here to help with these useful tips.

20 percent of the total home price is a rather large quantity. If the home costs just $100,000 you are expected to put down $20,000. Your mortgage finances the remaining 80 percent, but that’s still quite a bit of dough you have to hand over–it almost hurts. Many of us don’t even have that much saved up for retirement, so how is it possible to acquire that much money in order to finance a down payment?

Although 20% down is recommended, loans with 1% down and even 3% down can be made.  There are many alternative types of programs available. Contact  today to learn more.

How You Can Save for a Down Payment

Have to Start Somewhere 

Small contributions to your savings account can add up over time. If you want to save for your down payment, you need to adjust your budget and divert that extra cash to your down payment savings account. Adjust your budget according to how fast you want to purchase your home.

Calculate How Much You Need

You can start saving for a down payment without knowing the exact amount you will need, but eventually, you will have to figure out how much cash you will have to put together.  Consider the price of the home you can likely afford, and aim for 20 percent of that numerical value.

Invest, Don’t Save

If you don’t plan on buying a home for the next five years or so, you need to consider making your money make money for you. For example, let’s say you invested $1,000 in a brokerage account right now with the intention of buying a home in 7 years. If you were to contribute $500 a month for those seven years and earn an average of 6 percent, you would have enough for a rather impressive down payment. (How much? $51,866.66 to be exact.)

When it comes to saving for a down payment or any other home-buying-related issue, we can help. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you!