Offering a down payment on a home can save you a lot of money in the long run. Even if you don’t plan on buying a home for several years, you might be thinking about starting to save for a down payment.
In these five steps, we’ll cover how to save for a down payment on a house and some of the options you have in regards to financing and loans.
How Much Should You Really Save?
Before we get into how to save for a down payment, we first want to cover how much money you should really be saving. You’ll find in your research that 20% is a common answer. It is a safe number, especially because it helps avoid additional costs like private mortgage insurance (PMI). But, if you’re not concerned about PMI, there isn’t a rule that says you have to put down 20%.
At a minimum, a conventional mortgage usually requires a down payment of at least 5% of the purchase price while an FHA loan requires a minimum of 3.5% of the purchase price. Regardless of the minimum percentage allowed, anything under 20% will require PMI which comes out around 0.5% to 1% of the loan amount and is tacked onto your monthly house payment.
While 20% should be the goal, don’t let that keep you from buying a home. Sometimes a smaller down payment can be a smarter option for you financially. Every situation should be weighed on merit and based on your long- and short-term goals. If you’re more comfortable putting forward a lower down payment, you should check out FHA or VA loans, or inquire with your local housing authorities for programs that offer first-time buyers and low- to moderate-income families a lower down payment.
How to Save for a Down Payment
1) Figure Out How Much You'll Need
To start, you’ll want to figure out how much you can comfortably afford to pay each month on a future mortgage, as well as how much you can comfortably set aside every month in a savings account. You can use an online calculator to figure out how much down payment you’ll need based on the various percentages of a down payment, potential PMI costs and how different each scenario would make your monthly payments.
2) Make Room in Your Budget
Since we’re talking about saving thousands of dollars, you might need to clear some room in your budget. That could mean earning additional income, cutting back on expenses, or both. Making room in your budget can help you save the kind of money you’ll need for your down payment, and it will also prepare you for managing the type of tighter budget required for homeownership.
3) Determine Your Timeframe
Based on how much money you can afford to set aside every month, you should be able to calculate how long it will take to save for your down payment. For example, if you can afford a $330,000 home and want to put down 20%, you’ll need to save $66,000. If you realize you can only afford to put away $1,000 in savings per month, it will take you about five-and-a-half years to save. But, if you realize that you only want to put down half that amount, it will take you less than three years to save.
4) Find the Best Way to Save
Since the money you’re saving for your down payment has a specific purpose and you might have a timeframe you want to purchase within, you should not save money in risk-type investment vehicles like stocks. Instead, you should look into high-yield savings or a money market account. This way, you’ll have more interest in these accounts and make your money work for you. You can also put it into a certificate of deposit which may have less flexibility and liquidity, but the principal protection and yields are much better.
5) Set Up an Automated Savings Plan
Unless you’re a saver by nature, you’ll need to automate your savings process to help you. That might mean some sort of payroll savings plan. Just like a 401(k) plan, you should allocate a certain percentage of regular pay to go into a savings account dedicated to your down payment. This removes the temptation and ability to spend the money on other purposes.
Buying a home can seem like a long process, but all these preparations help you plan for homeownership. If you think you may be ready to buy a home or if you have questions about home-buying,
With stay-at-home orders going into effect across the country as we ride out the COVID-19 pandemic, many of us are finding ourselves spending a lot of extra time at home. This unexpected free time can be the perfect opportunity to start your spring cleaning, as having a clean, organized home can help uplift your mood while making you feel productive. Here are five tips to help you kickstart your spring cleaning:
Create a schedule that is easy to stick to. When tackling spring cleaning, it may seem daunting to take on what seems like a million and one projects. Having a plan for how you will take on spring cleaning projects, however, will help you stay focused and organized as you conquer each cleaning task one at a time. Make sure you’re not overwhelming yourself with projects either, and instead, break your schedule down into easy-to-manage chunks of time that will help you stay accountable while being highly productive.
Declutter, declutter, declutter. If it seems like your house is never truly spotless, one reason for this could be all of that extra clutter spilling out of closets and from underneath beds. Almost everyone experiences a natural urge in the springtime to get rid of extra clothes, school papers and work documents, and other items lying around the house. Use that to your advantage and throw away or donate all that clutter so you can start fresh! If you can’t make it to your donation drop-off center of choice, set aside a closet or designated space to store all your unnecessary items until you get the chance to give them away.
Get the whole family involved. If cleaning the entire house seems like a little too much to handle on your own, it’s never a bad idea to get your family involved. Tackling spring cleaning projects together as a family is a great way to enjoy quality bonding time while knocking out tasks quickly. If you are finding that some of your little helpers are reluctant to join in, find ways to make cleaning more engaging by listening to fun music or promising incentives for completing tasks. Ice cream after cleaning out the garage, anyone?
Don’t forget to disinfect your tech. It can be easy to overlook, but our technology carries a lot more germs than you might think. While you should be cleaning more commonly-used devices like your smartphone daily, spring cleaning is the perfect time to deep clean your laptop, gaming devices, remotes and any other tech gadgets you use regularly. Try to avoid using harsh cleaning products like antibacterial wipes or sprays that you usually use while cleaning, as your gadgets are delicate and can be damaged even by water. Instead, use products that are specifically designed for cleaning tech products to avoid scratching or internally harming your tech.
Establish cleaning habits that will last you year round. Make future spring cleanings a little bit easier on yourself by establishing habits to help keep your spaces clean and fresh throughout the year. By dedicating even just half-an-hour every few days to cleaning out your fridge or tidying up a closet, you will save yourself time and hassle in the long run!
by John "Robert" DeNiro 03/18/2019 repost 04/15/20
Just because life “happened,” and you never made it to college doesn’t mean that you can’t be learning and improving all the time. Even if going to school now is out of the question due to family obligations and budgetary restraints, there are still ways to learn, and also earn degrees and certifications from home.
Free and low-cost online classes
Many online schools and universities provide free information access and offer courses that let you learn hobbies, software, and even curriculum for credit.
edX offers courses from many of the country’s top institution and even universities from other countries. You can take classes in computer science, languages, business, and even engineering. And these courses are taught by professors from Harvard, MIT, The University of Texas, and The Hong Kong Polytechnic University among other top tier schools.
Take low-cost courses from Udemy and choose from over 100,000 classes. Learn at your pace and on your schedule. Hone your skills in design, photography, software, marketing, business, and more subjects. And find courses in non-English languages as well, including Español, Português, Français, and others.
Attend an online-only school such as Western Governors’ University, founded by a group of state governors to offer a different form of education. Students take courses utilizing cutting-edge technology in non-traditional school terms to learn differently, master concepts, and earn degrees.
You can even study artificial intelligence, robotics, and other ground-breaking and innovative courses through Udacity. Study with industry thought leaders and learn world-class programs.
Also, there are a host of other free courses and classes streaming live on fitness, home repair, cooking, and myriad other subjects. As long as you have access to a device—computer, television, smartphone, you can learn from home.
Even learn a new language through an app on your phone. Duolingo, as one example, lets you learn nine different languages from your desktop, laptop, or phone in a game-type format where you can earn badges and tokens as your scores improve and your language ability develops. Then, top of your skills by logging into Hulu, Netflix, or Prime Video to watch movies and television shows in your new language to hone your abilities. Some online trade schools offer certification so you can make that next career move. With so many options available, you can learn almost anything from home to set you up for life.
If you learn better in the classroom, ask your neighborhood realtor to suggest classes, programs, and offerings in libraries, churches, and other locations in your new area.