Home Sweet Home

Congrats on your decision to purchase your first home! While buying a new home comes with a lot of emotions—excitement, nervousness, happiness, worry—the best feeling comes from being as financially prepared as possible before signing the dotted line. One of the first things you can do is save up for your down payment.

Saving for the Down Payment

Your down payment is the amount you will need at the closing of your new home. Depending on the type of loan and interest rate you receive, your down payment will be a certain percentage of your home’s total cost. While your down payment can equal a decent amount of money, there are ways you can start saving now for it before you even start house hunting.

First, you want to better understand what type of home you can afford. The last thing you want to do is put extra financial stress on yourself by purchasing a home you really cannot afford. You want to be comfortable enough financially in your new home to leave room in the budget for still being able to do some extras (e.g. go to movies, dinner with friends, vacations, etc.), while also being able to save for a rainy day.

Once you have determined the amount you can afford, this can give you a good idea of about how much you will need to save for your down payment. Therefore, you can re-work your budget to add a section for “down payment,” in order to start setting aside the funds immediately. You may also want to open a separate savings account so that you are not tempted or do not get confused with what money goes where or is for what.

You can also start cutting back on things to be able to put more money back for your down payment, such as sticking to your grocery lists instead of buying extras, renting movies at home instead of going to the movies every weekend, etc. You would be surprised how much a little bit here and there goes a long way.