Saving for Your First Home
Find room in your budget to stash away savings for the down payment on your first property purchase.
Before you take the plunge and become a homeowner, you’ll want to review your finances and all the expenses that come with buying a home to better prepare you for this new adventure.
The Down Payment
The traditional down payment amount is 20% of your home’s purchase price, but there are options and mortgage products available that require less, such as FHA mortgages, which offer down payment options as low as 3.5%. Know that you may be required to pay an additional monthly fee (PMI) if you make a down payment of less than 20%.
To estimate how much you might need for your first home purchase, browse homes for sale in your preferred neighborhoods. Then, try our mortgage calculators to crunch some numbers.
You’ll want to think about additional expenses to get a more complete cost of homeownership. These may include:
- Homeowners insurance
- Property taxes
- Property Mortgage Insurance (PMI)
- Homeowners Association (HOA) fees or condo fees
- Maintenance and repairs
- Improvements and remodeling
- New furniture
It’s also a good idea to keep some money in an emergency savings account to ensure you’ll be able to continue paying your mortgage if faced with unexpected expenses.
Ideas for Saving
Saving for a down payment is a serious commitment. To see real results, you may want to consider lifestyle changes, including cutting cable, reducing restaurant meals, and keeping your old car for longer.
Other ideas to help you save for that dream home include:
- Save raises, bonuses and tax refunds. You won’t miss what you never had. Deposit big windfalls directly in your savings.
- Choose a “staycation.” Vacation costs easily run into the thousands. Save a bundle by having a weekend getaway nearby instead.
- Wear your old clothes. Avoid buying new clothes, shoes and accessories for as long as possible.
- Check your interest rate. If you’re carrying a credit card balance, shop around for a lower rate to save on interest.
- “Did I need it yesterday?” Before making an impulse purchase, ask yourself this question. If the answer is no, you probably don’t need to buy it.