Six Tips to Save for a Down Payment

When considering a new home purchase, the down payment you put upfront plays a major role in your future housing expenses. According to the Consumer Financial Protection Bureau, the amount you save can greatly influence your interest rate, monthly housing payment, and your need for mortgage insurance.

As you prepare for the homebuying process, First Bank Mortgage is highlighting six tips to help you cut the extra costs and save a substantial amount for your down payment.

“Typically, lenders require anywhere between 3 and 20 percent of a home’s purchase price as down payment,” said Andy Newbold, Mortgage Branch Manager with First Bank Mortgage. "The down payment that is best for you depends on your overall financial situation. One of the first steps in the journey is to speak with a knowledgeable First Bank Mortgage Home Loan Advisor and have a discussion about your individual needs and goals. There are many low down payment programs and options that may be available to you.”
 
Newbold added that prudent money management during the homebuying process is crucial. “It's important to keep credit card balances low and to try to avoid opening new credit cards or taking out any new loans, such as for a new car or new furniture, during the home buying process.”

Here are a few tips to help you save for a down payment:

• Develop a budget and timeline. Start by determining how much you’ll need for a down payment. Create a budget and calculate how much you can realistically save each month – that will help you gauge when you’ll be ready to transition from renter to homeowner.  
• Establish a separate savings account. Set up a separate savings account exclusively for your down payment and make your monthly contributions automatic. By keeping this money separate, you’ll be less likely to tap into it when you’re tight on cash. Consider opening the best consumer high-yield savings account First Bank offers.
• Shop around to reduce major monthly expenses. It’s a good idea to check rates for your car insurance, renter’s insurance, health insurance, cable, internet service, or cell phone plan. There may be deals or promotions available that allow you to save hundreds of dollars by adjusting your contracts. 
• Monitor your spending. With First Bank’s eBanking, keeping an eye on your spending is easier than ever. Track where most of your discretionary income is going. Identify areas where you could cut back (such as nice meals out, unused subscriptions and memberships, vacations, etc.) and instead put that money into savings. 
• Look into state and local homebuying programs. Many states, counties, and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants. Find out more about First Bank Mortgage’s first-time homebuyer programs.
• Celebrate savings milestones. Saving enough for a down payment can be daunting. To avoid getting discouraged, break it up into smaller goals and reward yourself when you reach each one. If you need to save $30,000 total, consider treating yourself to a nice meal every $5,000 saved. This will help you stay motivated throughout the process.

Whether you’re in the market to purchase a home soon or planning for the future, let First Bank Mortgage’s team help you navigate the homebuying process. For more information on how First Bank Mortgage can help you reach your goals, contact a First Bank Mortgage Home Loan Advisor (HLA) today.