It can be a very intimidating task: trying to save up tens of thousands of dollars to make a down payment on a home. That big of a savings goal is extremely overwhelming since it is one of the biggest purchases we ever make in our lives. However, the first step you need to take is to breathe and not worry too much. It’s all about taking one step at a time and listening to wise advice from friends, family, and experts.
The most conventional rule for down payment percentages versus mortgage percentages is 20% upfront and the remaining 80% in mortgage. Even though 20% may not come off as a high percentage, when you consider how much houses cost nowadays (especially where we live in Southern California), that is a big chunk of change that you need to save up.
First, start to figure out how much you are willing to spend on your home and how quickly you would like to save the down payment by. After that, determine 20% of the value of an affordable home and that will be your target savings. Then you can have a monthly savings goal to meet.
Trulia offers a few great tips for saving up for your down payment. They advise you to start small because even the smallest contributions to a high yielding interest savings account can add up overtime if you are consistent. Look for ways to cut costs in small ways and then have those savings automatically added to your down payment fund. They also suggest investing your fund instead of sticking it in a savings account. If you plan on buying in more than five years, then you may be able to get 6% compound interest instead of the 1% that is typical for a high yielding savings account.
This article offers even more great ideas to reach your down payment goals in unconventional ways so check it out at the following link: