If homeownership is your goal, then saving for a down payment on a house is a major step. It’s a financial commitment and one that takes a great deal of planning and preparation. While saving for your down payment is no easy task, BestMichiganHouses.com will make it a little easier on you with our guide to understanding, and saving for, a down payment on your next house.
How Much of a Down Payment do I Need?
The first question that you might be asking yourself is, “How much of a down payment do I actually need?”
Well, that depends. Many people believe that a down payment of 20% is encouraged, but this is not actually the case. In fact, home buyers can put as low as 3.5% -5% down, with loans up to $417,000.
While saving for 5% is easier than saving for 20% in the short term, paying more for your down payment is not necessarily a bad idea. If you choose to put more money down on your house, there are a few benefits:
- Your home will ultimately cost you less. You will pay less interest if you have a smaller balance after your down payment.
- If the market is competitive, a higher down payment will give you an edge over other buyers.
- If you put more money down, your lender is more likely to give you a lower mortgage loan interest rate.
Ultimately, how much of a down payment you need depends largely on your personal financial situation and how much money you will be able to save.
Steps to Saving for a Down Payment
- Pay close attention to your finances. Track your income and how much you spend every month, making sure you know exactly where your money is going.
- Categorize your spending. Take a look at your finances and separate them based on how much money goes to what you want versus what you need.
- Decide what money you have left and where you can cut spending. Look at what expenses you can reduce and see how much money you have left at the end of every month.
- Set realistic goals and then hold yourself to them. Decide how much to save every month and determine what it will take to get you there.
Additional Tips for Saving for your Down Payment
- Set up a separate savings account for your down payment so that you’re less likely to dip into this fund
- Dedicate your tax return towards the down payment
- Set up your direct deposit so that a portion of your money automatically goes to a savings account every time you get paid
- See if you can get the seller to help with the closing costs through concessions. This will help with a lot of the upfront costs that come with paying for a home, but the likelihood of a seller covering these costs depends largely on the market. It’s best to talk with your Realtor (let Bittinger Team, REALTORS answer your questions and help save you on your future home) or loan specialist about this option.
The Bottom Line
With a little help, homeownership is well within your reach! Contact us at BestmichiganHouses.com to answer any of your questions. Our expert team of Realtors are pleased to serve Canton, MI by guiding you on the search for your perfect home.