Accumulating a Down Payment on a Home

Thursday, May 16 at 01:55 PM
Category: Personal Finance

Figuring out what home price you can afford will largely depend on the monthly payment. The monthly payment not only includes principle and interest but also a monthly amount for property taxes and homeowner’s insurance.

The minimum down payment when buying a home will typically be determined by the loan program you choose and can range from 0-20 percent of the purchase price. If you are able to put down more than the minimum, then you will be able to have a lower monthly payment. However, you should also remember it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture or improving the landscaping all take money and you don’t want to stretch yourself too thin.

Accumulating a down payment
As simple as it sounds, most people end up saving for a couple of years to accumulate the amount needed for a down payment on a home. This may mean dining out less or finding more cost-effective dining and entertainment options.

An easy way to save is to enroll for an automatic savings plan at your financial institution. Have a certain amount transferred from your checking account to a dedicated savings account each month. This provides some discipline and you may be able to use a money market type of account to earn more interest.

Consider taking a staycation in order to save money. A staycation is like a vacation, but without the expense and time of actually traveling. The most expensive part of vacations is usually the combination of travel, accommodations and meals. While staying local will certainly save you money, you should still set a budget for your staycation. Your budget will probably be less than if you were going away, but more than you would spend at home. A staycation will still provide a way to have a break but will also give you the opportunity to save money.

Ponder opportunities to earn additional income. One option is a part-time job. This can be working for another company or working for yourself. Examine your skill set. Have you practiced a hobby for so long you’ve become an expert? Enjoy cake decorating or playing piano. Contemplate teaching classes or lessons. If you’re not willing to commit to a second job year round, then consider a seasonal job, perhaps during the summer or Christmas, to earn some extra money to add to your savings. 

Borrowing money from a family member is unacceptable funds for loan approval. However, a gift of money is acceptable. You may want to explore the option of gifted money.

Buying a home, especially a first home, is a big financial and emotional step, so do your financial homework. Take the time to meet with an Arvest Bank mortgage lender and develop a plan to become a home owner. It will take time to prepare, but it will be well worth it when you move in.

The views of this article are for general information use only. Please contact and speak with an Arvest Bank mortgage lender when specific advice is needed.

Tags: Financial Education, Home Loans, Lending and Financing, Mortgage
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