How to Save for a Down Payment on Your First Home

When you’re saving to buy a house in Columbia (or anywhere), it is important to understand the details of the financial commitment you are about to make. You should have a grasp on how much home you can afford, the total cost of everything involved and how to prepare for your home purchase.

Before you start your search for a home to buy, make sure your finances are in order. Two important things to consider are:

1. How much do you hope to finance from a mortgage lender.
2. How much do you have for a down payment.

Your down payment is a cash payment presented at closing to the seller towards the purchase of a home. The amount of your down payment has a long-term financial impact on you since it gauges your monthly mortgage and initial home equity.

Please know–you can’t just randomly choose your down payment. The mortgage for which you are applying will typically have a specified minimum down payment amount.

How to Save for a Down Payment

To boost your savings balance for a down payment, you need to establish a realistic plan. Here are five smart steps to take in your plans to buy a house.

1. Determine How Much You’ll Need to Save – Meet with a mortgage lender to review your finances to understand how much mortgage you can actually qualify for in your current financial situation.
2. Budget, Budget, Budget – Following a budget is another way to put more money toward saving for a down payment for your first home. This could mean earning extra income, cutting expenses–or both.
3. Check Your Credit – Your ability to borrow money and the interest rate you will pay is related to your credit score. Your credit score is based on the credit reports that include information like how much you have borrowed, where you have credit accounts, total debt, any missed or late payments, and how much more you can borrow with existing accounts. It’s always wise to check your credit reports well in advance of applying for a mortgage to correct any errors or disputes.
4. Open an Automated Savings Account – One tried and true method for saving money is to open an automated savings account. If you’re like many people, it’s not in our nature to save. That’s where an automated saving account comes in handy. When money moves directly into a savings account, it becomes almost invisible and removes the temptation to spend it on other things.
5. Add Anything Extra to Your Savings – You can make saving for a down payment easier–and even shorten the time it takes to save–by banking any “extras” that come your way. These can include income-tax refunds, birthday gifts, bonuses, large commission checks and even the sale of personal belongings.

Contact our team of REALTORS® to start your house hunt for Columbia homes for sale. Because we are live and work locally, our sales associates have the best real estate information and knowledge about Columbia and its surrounding communities to help you buy your dream home. Contact us today.