How To Save For A Down Payment On A House
Buying a house is one of the biggest purchase decisions anyone will make in their lifetime. As such, you will want to make sure you can comfortably afford it! With this five-step guide, I hope to alleviate some of your anxiety and answer questions you may be asking yourself.
How Much Do You Need To Save?
This is a common question asked when looking at the current housing market. One of the easiest ways to do this is by using our Home Loan Calculator. Some elements to take into consideration when determining how much you can afford include your annual income, mortgage principal and interest, real estate taxes, private mortgage insurance (PMI), homeowners insurance, and homeowners association (HOA) fees. Taxes and fees are often overlooked when calculating the total amount you need for a down payment on a house. Knowing how much home you can afford before you start looking will save time and disappointment should you fall in love with a home that doesn’t make financial sense for your current situation. Once you calculate this total, you will be well on your way!
Determine Your Timeframe
Naturally, the next step is figuring out how soon you would like to purchase your home. The sooner you figure this out, the longer you will have to set money aside for your home. For example, if you would like to purchase a home within the next five years and your down payment is calculated to be $50,000, all you have to do is take your down payment ($50,000) and divide it by the total amount of years, (5) which equals $10,000. This means you need to put aside $10,000 per year in order to purchase your home in the next five years.
Best Way To Save
When analyzing the best ways to save for a down payment on a house, you will want to familiarize yourself with investment options. Unfortunately, if you’re looking to buy your home sooner rather than later, you will have less options. Typically, you will want to stay away from high-risk investments such as stocks, real-estate investments, high yield bonds, etc. Instead, you will want to look towards safer alternatives such as certificates and savings accounts. While these might not be the most exciting option, they will be safer.
How To Budget Properly
If you happen to be great at budgeting, this part shouldn’t be too difficult. If you’re like most people, you may struggle with this part and that’s okay! Set up an automatic savings plan that will take a percentage of each paycheck and transfer it to your savings account. This will help remove the temptation of using the funds for other purchases plus you won’t have to remember to transfer the money. You can easily set this process up through Launch CU’s Digital Banking. Getting pre-approved with Launch CU can make this process even faster. We offer mortgages for as little as 3% down, making it easier than ever for you to step into your dream home.
Expect The Unexpected
We all know too well that unplanned bills can accumulate quickly. Expenses such as unexpected car repairs, sick visits, or even getting laid off from work can push your purchase date back even further. To prepare yourself for this, you should learn to be open-minded and stay positive. Don’t try to remove all entertainment from your life while saving for your house, just look for cheaper alternatives!