Stay tuned for a four part series on saving for a first down payment and how building home equity can be a way to build wealth over time.
Buying a home is typically the largest single purchase a person will make in their lifetime. When you are preparing to make a big purchase in real estate, it is important to understand the complexities of what you can afford, what everything will cost, and how to prepare for your purchase.
Here’s what you need to know about saving before you buy.
- In general, it is a best practice to put down 20% or more in cash when buying a home, however lower down payment loan programs are available and some may surprise you with the affordability even with PMI.
- Investing can help you reach your down payment savings goals faster than only saving in a cash account.
- Talk to a lender early on and look at the total costs of all the loan programs you qualify for and clean up your credit or know if you need to adjust your spending habits to increase your credit score.
We will talk later about how to best compare the rate quotes you receive.
Your down payment is a one-time cash payment you provide at the closing. The size of this payment has a long-term effect on your finances, as it determines your monthly mortgage payment and your initial home equity.
To sweeten the deal, sellers can also agree to pay for a portion of, if not all of your closing costs to help shorten the time frame to make up for the portion of costs you’re required to pay, if any.
Remember watch for part two: Calculate What You Can Afford
Thinking about buying or selling a home? Let me be your resource for local real estate information.