There are few things in life as big as buying your very own home. Homeownership has long been a central part of what many people call the “American Dream,” but it’s not something that you can achieve easily. One of the biggest hurdles to buying a new home is having enough money to put as a down payment. If you are trying to save for your next home, here are some ways you can save more to get into your dream home sooner.
Step 1: Identify your goal
It’s hard to save for something if you’re not exactly sure how much you will need. You don’t have to have an exact amount for your down payment, but it certainly helps to have a rough idea. One of the easiest ways to identify a down payment savings goal is to use an online mortgage calculator to help determine what you can afford. Put in the amount you can spend on a mortgage to see how much you can borrow for a home. Calculate 5% to 20% of that total to get your down payment (we know that’s a big range, we’ll talk about that in Step 3).
Step 2: Set a timeline
Along with deciding how much you want to save, set a goal for when you would like to be able to buy your home. Again, this doesn’t have to be an exact day, but you might set a goal to be in your new home by the first quarter of 2022, for example, which gives you about 12-15 months to save. Your specific goal might be longer or shorter depending on what you currently have in savings or how much you can afford to save each month.
Step 3: Choose the loan
It’s important to figure out what kind of loan might be right for you. The type of loan you get depends on several factors:
- Whether you’re a first-time homebuyer
- How much you can put down
- Whether you’re a member of the military or a veteran
- Your credit score
A lender like Integrity First Lending can help you determine which loans might work best based on your financial and personal situation. Knowing that can help you figure out whether you need 20% down (for a conventional loan with no private mortgage insurance), 5% down with loan options like FHA for first-time homebuyers, or something in between.
In part two of this blog post we’ll cover the next four steps to help you save for a down payment on your home. In the meantime, talk to Integrity First Lending to get a better idea of how much you will need to save for your next home.