How Much Do You Need to Save for a Home Down Payment?
Most people want to buy a home, but don’t know where to start. How much exactly do you need for a down payment these days anyway? The answer is that it depends on the home you are looking for, the type of loan you pursue and your credit.
A down payment calculator can help you figure out how much money you need to save in order for your dream of home ownership to come true. There are many loan calculators on the market, but the one we recommend is from Bankrate.com because it has a lot of useful information and is easy-to-use. You can easily find it online doing a search and play around with your options.
Low Down Payment Home Loans
Low Down Payment Home Loans are a popular option for people looking to buy a home. They are designed to make it easier for people to get into a home and, surprisingly, they are even available to those with lower than average credit scores.
USDA loans are one such example. USDA stands for United States Department of Agriculture, which is the government agency that, among other things, backs loans in rural areas. Don’t let the rural thing fool you though because you can get a USDA loan in 97 percent of the country and they are worth pursuing because they offer 0 percent down.
Another option is an FHA loan. FHA stands for Federal Housing Administration, which is the government agency that provides insurance on mortgages. Even with less than perfect credit, you can qualify for a home with as little as 3.5 percent down. That means 3500 dollars per every 100,000 dollars financed. Much easier to swallow than the 20 percent required from conventional financing.
Lastly, you have the VA loan which is guaranteed by the Veterans Administration. If you have served and can qualify for this loan, you would be hard pressed to find a better option. VA loans require no down payment and, unlike the other two options, do not require the buyer to pay for mortgage insurance. This alone will save the average borrower roughly 300 dollars a month.
How to Get the Best Mortgage Loan
There are many factors involved in a mortgage loan. These factors include the interest rate, down payment, credit score, and more. The better your credit, the better the terms are that you will receive.
For those getting ready to seek a mortgage loan, you should do several things to prepare yourself. One is to pull a credit report and look for errors. Another is to pay off as much revolving debt as possible in order to boost your credit score. Finally, you should avoid taking on any excess debt in order to keep your debt to income ratio as favorable as possible.
Some mortgage calculators can give you an estimate of how much you can afford to spend on your home and monthly payments based on your income and debt-to-income ratio. These calculators are very useful in helping you identify areas that you need to work on.
Loan Options for First Time Buyers
First time home buyers often find it difficult to get a mortgage loan. This is due to the lack of credit history, low income, and lack of collateral.
This is where first time home buyer loans come in. These loans are designed for people who can’t get a mortgage loan from traditional lenders like banks or credit unions. They offer lower interest rates and flexible terms for first-time buyers.
Loan options for first time buyers include:
Best Ways To Save A Home Down Payment
Now that you have a better idea about how much money you need to save, let’s look at some ways to save this money. Even if you only have to put down 3.5 percent, this can still be a challenge. On an average 300,000 house, for example, you would still need to come up with over 10,000 dollars.
One of the best ways to save for a down payment is to put your money into a devoted savings account. This should be an account that is exclusively used to store down payment money and that will not be accessed for other reasons.
Create extra income to save money.
Have you ever thought about creating an extra income? You can work a side gig while still making time for your full-time job. It will help you save money for that down payment in short order.
Some ideas for side gigs could include anything from driving from Uber to working a shift at the local Walmart to opening your own small business. The only thing limiting you from making extra money with a side gig is your imagination and your desire to get into a home.
Cut expenses to save money for a down payment.
If you do not have the time for a second job or want to save money even faster, another way to do so is by cutting expenses. If you’re looking to save money, consider eliminating unnecessary expenses and using that extra cash for a down payment on a house or savings account.
Think that you have no expenses to cut, you might be surprised. Sit down and take a close look at your budget and look for places to cut. You might shop for cheaper auto insurance, refinance your auto at a lower rate or even start meal planning to save money on food.
Get gifted the money you need.
Depending on the type of loan that you are looking to qualify for, you may be able to be gifted a down payment. This could come from a friend, family member or one of the numerous first time buyer organizations. Just be sure to check with your mortgage broker for clarification.