Saving for a Down Payment
It’s often thought that one cannot afford a home because the mortgage will be higher than rent. Then some digging happens, and many people realize that with their credit score and job stability that affording a mortgage is obtainable but now a new problem is faced – a down payment. In previous blogs, the Jen Martinez Team discussed different ways to budget your money for a healthier financial future. The process to save for a down payment may be quicker and easier than you think.
According to Keeping Current Matters, “using data from the U.S. Department of Housing and Urban Development (HUD) and Apartment List, we can estimate how long it might take someone earning the median income and paying the median rent to save up for a down payment on a median-priced home.” The common idea of households not using more than 28% of total income on monthly housing expenses is reinforced in these links.
In the Mid-West, it is estimated that it can take on average, 1-3 years before a homebuyer has enough saved up for the national average of 10% for a down payment. The majority of the U.S. with the exception of Florida, Hawaii, and the West Coast take far more time, averaging 6 years or more before having the minimum down payment of 10%.
There are programs for first-time home buyers and 3% down payment programs along with others that could expediate the funds needed for potential homebuyers.
It is often recommended that 20% of the total sales price be put down or a private mortgage insurance, PMI, will be added to your monthly mortgage statement until you’ve paid off the difference that gets you to 20% or more of the loan paid. You’ll also want to keep in mind that there are closing costs that could be thousands of dollars, inspections, and repairs to consider along with actual moving expenses and gradually making the home feel like yours.
If you intend on purchasing a home, start saving today. Research where you want to be, how much it will cost you to get there and how you can start trimming your budget to put a bit more into your future investment. If you have any questions at all, please reach out to the Jen Martinez Team and we would be more than happy to walk you through your options.