Before you start saving, it’s important to know exactly how much you need. So what’s a good down payment?
Ask yourself these three questions as you determine your down payment savings goal:
1. How much should I save for a down payment?
If you can’t pay cash for your home, plan to put at least 10% down. If you can, go for 20%. Why? Because putting down 20% means no private mortgage insurance (PMI)—an extra cost your lender tacks on to your monthly payment just in case you don’t make payments on your loan.
Here’s how to buy a house you can afford: Think 15 and 25. You want a 15-year, fixed-rate mortgage that’s no more than 25% of your monthly take-home pay.
And here’s how you can find a home you love that fits your budget: Get a trusted real estate Endorsed Local Provider (ELP) to help you shop for a home based on your price range.
2. How long will it take me to save for that down payment?
This is up to you, but patience and hard work really do pay off! Because the more time you spend saving up, the more money you can save up. And the more money you save, the less your mortgage loan will cost in the long run.
Stay focused and you should be able to save a nice down payment in two to three years. Try not to drag it out much longer than that, though. You’ve got plenty of other money goals to take on next—like your retirement and the kids’ college funds.
If we talk about economic theory and predictions, those factors should be resulting in a boom in mortgage refinancing. But locking in a deal is proving to be a challenge these days — even for well-heeled homeowners. The reason for this is that low appraisals and tight lending standards are making it hard for many borrowers to refinance, even if they have good credit rate and substantial assets. Even those who meet these hurdles can face frustrating waits.
Saving for a down payment is easier than you think.
By switching assets to your mortgage Borrower, cleaning up your credit and having a better understanding of how the new government programs work, you can improve your chances of scoring a good refinance deal.
3. Where is the best place to put the money I’m saving for a down payment?
In most cases, a down payment is not an investment. So stashing that cash in a money market savings account will get the job done. You’re not going to make tons on interest, but you won’t lose money either.
So, let’s say you have 24 months before you want to buy a home, and you decide to save $40,000 to cover your down payment (plus closing costs and other moving expenses). Now you’ve got your goal set up. Here’s how to fast-track your savings!
Dave Ramsey Date Unknown How to save a down payment for a house https://www.daveramsey.com/blog/save-down-payment-while-renting