Robin V. Wish - Real Living Suburban Lifestyle Real Estate



Posted by Robin V. Wish on 5/3/2021

Buying a home is a big financial endeavor that takes planning and saving. Aside from a down payment, hopeful homeowners will also need to save for closing costs and moving expenses.

When it comes to the down payment amount youíll need to save, many of us have often heard 20%, the magic number. However, there are a number of different types of mortgages that have different down payment requirements.

To complicate matters, mortgages vary somewhat between lenders and can change over time, with the ebb and flow of the housing market.

So, the best way to approach the process of saving for a down payment is to think about your needs in a home, and reach out to lenders to start comparing rates.

However, there are a few constants when it comes to down payments that are worth considering when shopping for a mortgage.

In todayís post, weíre going to talk about some characteristics of down payments, discuss where the 20% number comes from, and give you some tips on finding the best mortgage for you.

Do I need 20% saved for a down payment?

With the median home prices in America sitting around $200,000 and many areas averaging much higher, it may seem like 20% is an unattainable savings goal.

The good news is that many Americans hoping to buy their first home have several options that donít involve savings $40,000 or more.

So, where does that number come from?

Most mortgage lenders will want to be sure that lending to would be a smart investment. In other words, they want to know that theyíll earn back the amount they lend you plus interest. They determine how risky it is to lend to you by considering a number of factors.

First and foremost is your credit score. Lenders want to see that youíre paying your bills on time and arenít overwhelmed by debt. Second, they will ask you for verification of your income to determine how much you can realistically hope to pay each month. And, finally, theyíll consider the amount youíre putting down.

If you have less than 20% of the mortgage amount saved for your down payment, youíll have to pay for private mortgage insurance (PMI). This is an extra fee must be paid in addition to your interest each month.

First-time buyers rarely put 20% or more down

Thanks to FHA loans guaranteed by the federal government, as well as other loan assistance programs like USDA loans and mortgages insured by the Department of Veterans Affairs, buying a home is usually within reach even if you donít have several thousands saved.

On average, first-time buyers put closer to 6% down on their mortgage. However, they will have to pay PMI until theyíve paid off 20% of their home.


So, if youíre hoping to buy a home in the near future, saving should be a priority. But, donít worry too much if you donít think you can save the full 20% in advance.




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Posted by Robin V. Wish on 7/23/2018

Buying a home will likely be one of the largest financial decisions you will make in your lifetime. While this may seem scary at first, itís worth noting that buying a home can also be a valuable financial investment.

When it comes to preparing to buy a home, many people just wait until they run out of room in their apartment before deciding that they need to upgrade to a home. A better approach, however, would be to start planning for your first home a year or more in advance.

Saving for a down payment is a vital step to making the best long-term financial decision. A larger down payment can help you pay off your home sooner, pay thousands or tens of thousands less in interest, and start using your home equity as an asset.

But, saving for a down payment is easier said than done. So, in this post, weíre going to talk about some of the ways you can aggressively save for a down payment so that, when the time comes, you can achieve long-term financial security from your investment.

Setting your savings goals

The first thing you should be thinking about when saving for a down payment is what your goals are in a home. Setting realistic goals in this phase will make saving for your down payment more feasible and less discouraging.

Think about what you really need from a home at this point in your life and compromise where you can.

Remember that on top of your monthly mortgage payments, youíll likely also be paying for taxes, insurance, utilities, homeowners association fees, and more.

Save on a timeline

When setting your savings goal, make sure youíre aware of the timeframe youíre working with. If you want to buy a home next year, youíll need to focus on short-term savings options. However, if youíre okay with renting for the next 5 years, investing your money could be a better option.

Lock away your savings

Treat your down payment savings like an emergency fund. Open a separate account, automatically deposit a portion of your pay into the account, and never withdraw from it. To do this, you will, of course, need to already have an emergency fund with a monthís expenses in it.

However, once youíve established your emergency fund, start immediately depositing into your savings account.

Pay off credit cards

It may seem like saving for a down payment is more pressing than paying off old debt. However, the numbers will show that making interest payments on your credit cards is essentially throwing away money that could have been used toward your down payment savings.

Adjust your spending habits

While it isnít easy to start spending less once youíve built a standard of living, there are ways to spend less money and still lead a fulfilling life. Think about where your money goes each month, including bills and services you might pay for.

Now could be the best time to cut the cord and start using a service like Hulu to save $50 or more each month.

Time for a raise?

If itís been some time since your last pay raise, now could be an ideal time to speak with your employer. To improve your chances of success, donít discuss reasons outside of work that might be influencing your decision to ask for a raise (such as saving for a down payment). Rather, back up your request with evidence of your accomplishments at work.




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