Is your goal to save for a down payment?

If your goal is to save up the money for a downpayment on a new home this year, it’s time to start planning! Downpayments for a home are often the most significant financial savings people accrue in their lifetime, so it’s best to get a plan in place. Otherwise, you might find yourself spending your savings!

So, what’s the first step when saving for a downpayment? A yearly budget. If you don’t already have a budget in place, now is the perfect time to set one up. Setting up a budget can be a lot of work, but a few principles can help.

• Make sure that you set yearly, monthly, and even weekly goals. Your yearly goals are your long-term plans, while your monthly and weekly goals have to do with your daily savings and spending habits.
• Track your expenses. Your budget won’t work unless you know how much you are spending and saving. So if you’re new to the budgeting game, start by tracking your expenses and then begin slashing your spending.
• Stick to your rules. Whatever budget system you choose to go with, make sure that it’s one you can stick with. If you’re constantly overstretched or paying off debt, it’s not feasible.

Once you have a workable budget in place that addresses your short-term and long-term goals, it’s time to plan out how much of a downpayment you’ll need. A traditional downpayment is 20% of the purchase price, which allows you to get a reasonable interest rate and avoid needing private mortgage insurance. However, 20% of your purchase price can be a lot of money, especially if you live in an area with high housing costs.

If saving a 20% downpayment isn’t realistic for your situation, that’s okay. Some options can still help you to be a homeowner. A Federal Housing Administration loan (FHA) or a Veteran’s Administration (VA) loan are great options for new home buyers. These loans come with resources to help families and first-time homebuyers secure loans with lower down payment requirements. *Closing costs and fees may still apply. Come in and speak to one of our advisors to see if either of these loan options is the right fit for your situation.

Another option is saving a smaller downpayment and then securing private mortgage insurance (PMI). Typically down payments of less than 20% of the purchase price are required to have this insurance. This insurance is usually a small percentage of the purchase price –– between 0.5% and 1%. It’s added to your regular payments until your loan is at least 80% paid off.

Whatever loan option you choose, you have to find the right one for your needs and budget. That’s where we can help. We are specialists who know the mortgage industry inside and out. So let’s talk about getting you pre-qualified for the right loan option today.