In recent years, it became more difficult to save for a down payment. This caused many homebuyers to use FHA mortgages. This type of loan often requires smaller down payments, especially if you have a solid credit history.
However, as economic conditions improve, a greater number of buyers have made larger down payments so far this year, according to recent profile of homebuyers and sellers from the National Association of Realtors.
“It is important to note that while the economy as a whole does affect the housing market, most buyers purchase for the plain desire to own a home and establish a household ofÂ their own,” the report said.
Growing down payments is a positive sign for both the housing market and the economy. It indicates that consumers are more willing to spend money and take on debt. In addition, because lending standards became so strict in recent years, more consumers qualifying for conventional home loans is an indicator that their credit standings are also improving.
Prior to purchasing property, it’s important to ensure you are in good financial shape, but the buck doesn’t stop there. You also need to save for a sizable down payment. Most experts recommend a down payment of at least 20 percent of the property’s value. However, saving this money is sometimes easier said than done.
How to save for a down payment
There are a number of different ways to start saving for a down payment. Every approach requires time, effort and self control, so make sure you have the right mindset.
Before you start saving, determine the ideal time in which you will have enough money saved. While you might think the sooner the better, you need to be realistic about this timeline.
Generally, all the money you put away for your down payment comes out of your everyday spending. Take a few months to account for where all of your money goes. This includes everything from paying rent to purchasing a cup of coffee.
Once you have this information, you can look for ways to cut back spending and improve your savings rate. For example, if you buy lunch at work every day, try to bring food from home from now on. While these small individual expenses may not seem like very much, they can add up to a considerable amount of money during the course of a year.
Qualifying for a home loan is a major step in your personal finances. Freedom Mortgage is here to keep you up-to-date on the latest tips and tricks of the mortgage industry whether you’re looking to improve your home value or simply make a mortgage rate comparison.
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