Budgeting for the purchase of a brand-new house entails numerous details. Not only are you saving for the monthly mortgage, but the many other expenditures that come along with it. This includes the down payment, which is often about 20% of that asking price. It may seem like a lot to take in, but by breaking the process down into these simple steps below provided by Rex Homes, you’ll be prepared to offer up a down payment in no time.
Set a Savings Goal
To determine a clear savings goal, you’ll have to do some research first. Get familiar with the price range of the homes you’re looking for. Depending on the location, style, and other such factors of your preferred houses, your price range may be surprisingly modest or uncomfortably expensive. Pay close attention to what is being offered in the current market and construct your budget from that information.
Once you have this information, it’s best to use an affordability calculator to determine your spending power. These calculators will provide you with an accurate estimate of what you can expect your down payment to be based on the following factors:
- Your gross monthly income
- Your monthly, non-mortgage expenses
- Your desired home loan term
After you’ve got a clear idea of what to expect in a down payment, you can start saving!
Developing a Savings Plan
Now that you have your estimated down payment amount, it’s time to take action and start working toward that goal. When you start putting money away, remember that you don’t have to start with large payments. Your budget can be as comfortable as you need it to be. You don’t want to break the bank before you even buy the house!
Decide on a reasonable monthly payment that allows you to make progress on your down payment savings, while also allowing you to pay down your current debts and otherwise strengthen your finances.
Pocket Any Windfalls
Bonus payments are the best, especially when you’re not expecting them! However, you don’t want to get carried away and spend them as soon as they’re given to you. Instead of spending that holiday bonus or tax refund on frivolous items or vacations, take it straight to the bank.
Such surprise funds are highly advantageous for your progress in saving up for a down payment. Why? They buy you time in case you face financially troubled times at one point in your savings journey. If you have to skip a few weeks or a month when putting money away, this loss will be padded by the windfall.
Regularly Review Your Budget
As you progress in building up your savings for the down payment, make sure to regularly check in with your balance. You’ll need to closely monitor the balance and adjust your monthly savings plan as needed to move the process along as required.
Through all of this, an experienced mortgage professional can help to keep your finances healthy. They can advise you on the most beneficial practices to implement as you work to improve your eligibility for borrowing. If you’re ready to start saving for that down payment, get in touch with a qualified mortgage professional today.