How to Save For a Down Payment on a Home
Saving for a down payment on a home can be a challenging, but important step toward achieving your goal of homeownership. A down payment is a part of the purchase price of a home that is paid upfront, typically ranging from 3% to 20% of the sales price. Saving for a down payment can take time, effort, and planning. Below, you will find 3 tips to help you save up for a down payment on a home.
Figure Out How Much You Need
The first step in saving for a down payment is to determine the budget for your new home and the target savings goal. A general rule of thumb is to save at least 20% of the home’s purchase price, which will allow you to avoid private mortgage insurance (PMI) and potentially result in a better interest rate. However, depending on the type of loan you choose, you may be able to put as little as 3% down. It is important to remember though, that while putting 3% down may be more convenient, the minimum down payment will result in a higher monthly mortgage payment, including Private Mortgage Insurance (PMI).
Create a Budget
Creating a budget is crucial for any savings plan, especially when you are saving for a down payment. You need to understand where your money is going and where you can reduce expenses to free up money that you can save. Start by tracking your monthly income and expenses to identify areas where you are overspending, and which can be redirected to your down payment fund.
Explore Down Payment Assistance Programs
Down payment assistance programs are available for those who may not have enough money saved for a down payment. These programs can come in the form of grants or low-interest loans and are typically offered by state and local governments, as well as some private organizations. FHA, VA, and USDA loans are also available for those who qualify, which may require a lower down payment at closing. Just be sure to read and understand the terms of the down payment assistance program you’re offered.
KEMBA Financial Credit Union Can Help!
Not only can KEMBA help you find the right mortgage, as well as provide budgeting tools and tips, KEMBA can also help you with the savings vehicles for your new home. Whether it’s savings account, a money market, or a Certificate to save for your down payment, KEMBA can help you determine the right fit so you can meet your goals! KEMBA is the largest Central Ohio-based credit union and offers a wide range of financial products that serve Central Ohioans, like you. If you are ready to explore your mortgage options or are looking to create a savings plan, contact our local, dedicated associates at 614.235.2395 and select Option 4 to start the process.