You want to buy a home, but you don’t have a 20 percent down payment saved. Good news! In many cases, homebuyers don’t need that much money to buy a home. But you’re going to have to set aside some money for a down payment. How much? And how can you save the amount you need?
The answer is that it depends. You’ll want to start your home buying journey by meeting with a reputable lender to see how much house you can afford, how much of a down payment you’ll need and which types of home buying programs you may qualify for. While many conventional home loans require a 20 percent down payment, there are numerous other options available for those with more limited funds. If you are a veteran or member of the military, you could qualify for a VA (Veterans Affairs) loan with a down payment as little as … no down payment at all! There are also the popular Federal Housing Administration (FHA) and USDA (U.S. Department of Agriculture) loan programs, with typical down payments of between 3-5%. Meeting with a reputable lender is important because you’ll get an idea of how much of a down payment you’ll need to save based on your individual circumstances, credit score and existing debt load.
Once you have an idea of how much house you can afford and how much money you need, you’ll want a home buying plan. Suppose you qualify for a $300,000 home and need to save $15,000 for the down payment and for closing costs. A plan will help you reach your goal. Many prospective home buyers find it useful to calculate a monthly savings goal. When saving for a home, it’s useful to take a look at all the money that’s coming into your household and how it’s being spent. If you haven’t had a budget before, now’s a great time. A bit of budgetary belt-tightening can help you meet your downpayment savings goals faster.
You may be surprised when you review your spending habits that there are areas you can cut back. Do you need to pay for a premium cable package? The deluxe cell phone plan? Daily trips to Starbucks? Can you take your lunch instead of going out to lunch every day at work? Cutting down or cutting out small and large budget items can help you free up more cash for your dream of homeownership.
While saving for a home, you’ll want to avoid large purchases on credit. Lenders take into account how much money you have in savings, your overall debt levels, how much of your available credit you’re using and your credit score. Try not to be discouraged if you face a financial setback, such as an unexpected car repair, while you’re saving for a home. Enlist friends and family to provide encouragement and keep you motivated. You may be surprised at how quickly you’re able to build your savings. Good luck!
