A Larger Down Payment Can Save You Money in the Long Run
Is buying a house on your bucket list? Saving for a down payment is an important first step. When you make a substantial down payment, it lets you save on your mortgage financing. The larger your down payment, the sooner you'll be able to pay off your home loan.
Most financing arrangements require at least a small down payment when buying a house. It is not unusual for down payments to range anywhere from two to ten percent of the home's appraised value. That can be a lot of money, so planning is essential.
Our real estate agents have created this list to increase your odds for success:
- Start With Your Goal in Mind
If you don't have a clear goal to start with, odds are good you'll never reach it! There are two big factors you need to figure out first: How much you need to save and when you need it. These are the big factors that will help you determine how aggressive your saving needs to be. Of course, it never hurts to have savings, so don't be afraid to challenge yourself.
- Set a Budget
Many people have a general budget, but don't pay very close attention to it. When you are saving for a major purchase such as a home, it's essential to start with a sound budget you can consult every week. The simple act of writing down how much you spend in each expense category will help you find ways to save more money. Even putting aside $100 a month will help.
- Use Automated Savings
A payroll savings plan is the best way to consistently save for a big purchase. It will help you make sure you are constantly banking a certain amount. Allocate a percentage of your pay to go directly toward your savings goal. You'll be less tempted to use the money for other things, and you'll know approximately when you will reach certain savings milestones.
- Small Savings Count, Too
You can save money and thus move more into your savings – by finding ways to save a little bit more each day. For example, many banks offer a savings plan where they "round up" each small transaction and put the remainder in savings. You should also look at financial instruments such as credit cards and checking accounts. Are you losing money to fees?
- Bank Any Unexpected Cash
Every now and then, the average person runs into a little extra money. Tax returns are the biggest and most predictable example, but there may be others. Be sure to bank these rather than using them right away. Be proactive in looking for ways to create your own windfalls: For example, selling unwanted things in a yard sale or on eBay can net several hundred dollars in a day.
- Add Income if You Can
The internet offers thousands of ways to add a little additional income to your bottom line each month. Of course, you shouldn't be working 80-hour days to make your down payment – you'll just end up burnt out. After all, your "savings" budget is your future "household" budget, too! Still, you may be able to add a few hundred in just a couple of hours each weekend. It's worth it.
- Celebrate Your Milestones
Saving up for a long period of time can seem abstract and tiring. Look over your local real estate listings from time to time to remember what it's all for: Buying a house!
Thinking about buying a home in Harrisonburg, Staunton, or Moorefield? Contact Old Dominion Realty for personalized help and advice from our team of local real estate experts.