Saving for a mortgage down payment is one of the most difficult endeavors for the average individual or family. While some can find lending options at 0% down, most have to put at least 3% down (typically for a FHA loan) with many having to put down 5% (for a conventional loan). Those are bare minimum down payments. If you are looking to reduce your monthly payment even more so, a 10 – 20% down payment is typically needed.
With the average price of a home above $300,000 in the Las Vegas area, this can mean having $9,000 or more ready to be placed as a down payment. How can you save this money within a reasonable amount of time?
In one simple way: discipline. You have to discipline yourself to save money. This means cutting back on non essential items, finding cheaper options and being frugal. If your goal is to own a home of your own, this is how to do it. Here is an example.
If you are able to save $5.00 per day by cutting back on ordering coffee and eating out, this equals a total of $35 per week! (7 days per week). It may not seem like much. But over the course of a year that equals $1820.00. Over the course of 5 years – $9100.00. If you end up during that time gaining bonuses from work or other income sources, be frugal with those! You can easily add to the money you save already.
Consider also this: Doubling the amount you save to $10 can help you save $9100.00 in half the time, helping you buy your home much sooner. Or, over the course of 5 years, you may end up with close to $20,000! Keep in mind that a higher down payment reduces your monthly payment by reducing not only how much you finance – the principal – but also PMI (Private mortgage insurance), which is typically assessed when someone makes a down payment under 20%. If you are able to put 20% down, typically you can eliminate PMI all together and save even more!
Afterward, weigh the cost of what kind of a home you will want to buy. Make sure you are comfortable with the monthly payment – even if you qualify for it! The goal is to make sure you don’t over extend yourself.
In this way, you can make solid plans for your financial future.
Contributed by Nicklin Property Management.