Buying a home is the largest purchase most people will ever make.
If buying a home is one of your financial goals, it is best to begin preparing for it in advance as soon as possible. As with all major savings goals, the sooner you start setting aside money, the easier it will be.
You’ve probably been thinking about how and where to save money for a down payment. While the amount can be daunting, it can be done with a basic understanding of how real estate financing works and how to create a savings plan.
What is a Down Payment
Basically, a down payment is the amount of money you spend upfront to purchase a home. It is usually combined with a home loan to fulfill the total purchase price of a home.
Homebuyers have to make a down payment because lenders generally won’t finance 100% of the purchase price. The bigger the down payment you can make, the less risky the loan is for the lender.
So how much down payment do you need in order to purchase a home for sale in Charlottesville VA?
That would depend on three things – your lender, the kind of loan you will get, and your financial situation. Typically you’ll have to pay a minimum of 5% to 20% of a home’s purchase price.
Here’s how to save for a down payment the smart way:
Determine your price range
Before you start saving money for a down payment, you need to determine first your price range. You don’t want to overspend on a home you can’t afford to keep, do you?
When deciding on a price range, be realistic and consider your financial situation. The often quoted rule of thumb is you can afford a house that costs up to 2 ½ times your annual gross income. If you are buying with your spouse, you should also consider his or her annual gross income to help you decide just how expensive a home you can buy.
Learn to prioritize
Saving for a home is all about priorities. Would you be willing to tighten your belt in order to save for the down payment of your dream home?
Identify areas in your life where you can cut back on expenses so you can put more money in your savings. The best way to do this is to create a budget.
You can also look for a cheaper way to do things. Do you take expensive vacations? You can try something less expensive or closer to home. You can save for a down payment without diminishing the fun in your life.
Put your savings on autopilot
If you’re really determined to buy a home for sale in Charlottesville VA, you could automate your savings into an account specifically for your down payment.
Having it automated makes sure that you don’t forget to make the deposit into your savings account. You can choose a fixed amount, like $300 per month. You can also specify a percentage of each paycheck. This way you can save more when you get a raise or bonus.
Are you in the market for a home here in Charlottesville VA? Let me help you!
Call me, Pam Dent at (434) 960-0161. Let’s make sure that your real estate transactions go as smoothly and as stress-free as possible!