Ransom Kelly at Assurance Financial has helped so many Birmingham Alabama homeowners achieve their dreams. One of the most important elements of purchasing a home is learning how to save for a down payment. Today, we are here to give you advice on accomplishing your financial goals. With a better-sized down payment, you may end up getting better mortgage rates and terms. Read on for tips on gathering funds for a down payment on a new home.
How Much Down Payment Will you Need?
There are many wonderful programs out there to help you finance a home. Finding the right mortgage program can help you understand how much of a down payment is required for the purchase and financing. Many lenders seek a 20% down payment for conventional loan terms, however, you may be able to purchase mortgage insurance if you cannot save that much. In addition, other loan programs may require less of a down payment. Here are some examples:
- FHA Loans—loans backed by the Federal Housing Administration (FHA) may offer mortgages to first time home buyers with down payments as low as 3.5%.
- VA Loans—eligible service-members may qualify for a mortgage with zero down payment.
- USDA Loans—if you purchase a home in a qualifying area, you may have a very low down payment.
Savings Tips and Tricks
Whether or not you qualify for the above loan programs, you will want to save up when you go to purchase a home. There can be many costs. Here are a few tips and tricks to help you out!
1) If you earn extra income at work, through a bonus or a second job, always deposit this into a savings account first.
2) Set up a unique savings account for the down payment, and then establish how long you want to take to earn the down payment. Once you calculate how much you need to save, deposit the amount each month through automatic transfer from each paycheck to that savings account.
3) Round up on change from purchases, and then put the excess into a savings fund! For example, some banks let you keep the spare change on any purchase and throw it into a savings account.
4) Cut back on non-essential spending, such as meals out, new clothes, or trips to the movies.
5) Use cash reward credit cards and save the cash back amounts.
6) If you have paid off your car, keep it and do not buy a new one, save the monthly auto payments you would have been making for your new home.
Ransom Kelly at Assurance Financial hopes you found this week’s blog post helpful. Contact our Birmingham Alabama offices when you are ready to start shopping for homes!