Home Down Payment Details and Tips to Start Saving | Local News I Racine County Eye


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Saving for your first home can be overwhelming and confusing, even for the most financially savvy homebuyer. Conventional wisdom tells us that you will need at least 20% of the purchase price for a down payment, and after adding closing costs, taxes, fees and any necessary repairs, the bar at the property can often seem too high to lift. Today we’ll give you all the details on downpayments and tips on how to start saving for one of your own. You might be surprised to learn how accessible home ownership can be!

What is a deposit?

A down payment is simply a portion of the purchase price of the home that you pay up front. Whatever amount you put in is subtracted from the purchase price of the house, and your mortgage balance will be left over. Down payments are generally due on the day the sale closes.

How much should I put?

Most homebuyers aim for 20% of the purchase price when planning their down payment. If you are considering a $ 300,000 house, you would need $ 60,000 ready to be built. It is a large amount of money and can make owning a home inaccessible. Despite the 20% trope, you can get your dream home for as little as 3% down. The FHA and other types of loans offer lower down payments, but you will have to pay higher monthly payments and will need to purchase private mortgage insurance. At 3%, that $ 300,000 home could cost just $ 3,000 down payment.

What is private mortgage insurance?

Private mortgage insurance, or PMI, offers some protection to lenders in the event of default. Making a down payment of at least 20% will keep you from paying for mortgage loan insurance and is one of the best ways to lower your monthly obligations. The PMI will be added to your monthly bill by your lender, and you will not get these payments back at any time during the life of your loan. You can expect to pay between 0.25% and 2% of your loan balance each month in insurance payments, but the rates vary widely depending on the lender.

Tips for saving

We’ve compiled some quick tips to help you make your real estate dreams come true. Using these tips will get you started on the right track, and with a smaller down payment you could get your foot in the door even faster!

  1. Make a goal

It is essential to set goals to guide your financial journey. Decide what is important to you and set goals accordingly. If you want a home sooner rather than later and aren’t as concerned about monthly payments, set a lower percentage down payment goal. If PMI is something you’re trying to avoid, try saving for longer and breaking over the 20% threshold.

  1. Adjust your budget

Saving for a down payment comes with a lot of sacrifices and tough decisions. If you want to save a 20% down payment in five years, you will need to store thousands of dollars a year. Take a look at your spending and find places where discounts can be made to help you save. It all adds up, so any savings you can find will help.

  1. Focus on the end of the game

Staying focused on your goals will help you reach them faster. Use technology to help you save automatically – scheduled deposits and apps that round up your purchases to save can help you accumulate money without even trying. If you receive a work bonus or other unexpected funds, save it for your down payment. Before you know it, you’ll be ready to buy!

Think about what you can afford each month, start saving and you’ll be where you are in no time!

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Additional titles:

  • Down Payments 101: Everything You Need to Know About Buying a Home
  • Start saving for a down payment now with these simple tips
  • Here’s everything you need to know about home down payments and how to start saving.
  • Down payments, explained: what they are and how to save

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About Matthew R. Dailey

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