Tips for Saving for a Down Payment

October 10 2017

A recent survey found that 57 percent of Americans don't have $500 saved for an emergency. So how do you begin to save for a down payment, which can be as much as 20 percent of the cost of a home? The good news is there's no need to panic. There are steps you can take now to prepare for buying your dream home.

Where to Start
The first step is to figure out how much house you can afford. Here's a good rule of thumb: Your mortgage payment (including property taxes and insurance) should not exceed 28 percent of your pretax monthly income. If you're unsure how much your income will be when the time comes to buy, aim for 20 percent just to be safe.

How and Where to Save
Now that you know how much you should save, it's time to start storing up funds. Begin by setting up a separate savings account for the down payment. Financial experts recommend a low-risk "cash equivalent" account where you can easily access your money, such as a money market account, U.S. savings bond or FDIC-guaranteed bank account.

Once it's set up, schedule automatic deposits so you don't have to think about it. And look for areas where you can cut spending, such as going out to eat less or switching to a cheaper smartphone package.

We know it can sometimes feel that homeownership is out of reach. When that happens, remember to remain calm and stay on track. You could be living in your dream home before you know it.

Whether you are buying, selling, or refinancing, it is important to have an experienced mortgage professional to help you analyze your financing options, and make sure the closing goes smoothly. As a loan officer with Midwest Community Bank, I have the expertise and experience to get you the right mortgage, and to handle your transaction professionally. With my experience, and our rates and programs, you are sure to get the mortgage that is right for you. Please remember to get me involved early on in your home-buying process. Starting the Process not only gives you a better idea of what you can qualify for, it also gives you a stronger negotiation position when you find the home of your dreams.