Saving for a Home

Accumulating a Down Payment on a Home - The size of a down payment on a home is the most important factor in determining your monthly payment. Unlike interest rates, property taxes and insurance rates, you decide how much you borrow and therefore how large your monthly mortgage payments will be.

Most lenders require certain levels of down payments (often 5% to 25%) to consider you for a mortgage. The larger the down payment, the more comfortable they will probably be making you the mortgage. But it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture and landscaping all take money.

Ideas to consider:

Save. Most people save for a couple of years to accumulate a down payment. This may mean less or cheaper entertainment or less dining out. One way to save is with an automatic savings plan at your financial institution. Have a certain amount transferred from your checking account to a dedicated savings account each month.
Borrow the down payment from your retirement plan. Many company sponsored 401(k) or profit sharing plans have provisions to let you do this. Check the details of your plan.
Move. Live in a cheaper apartment while you accumulate your down payment. If you are just starting out or are considering changing jobs, consider an area with a lower cost of living.
Reduce other high interest rate debt. Paying off credit cards will take some of your savings, but you won't be paying the high rates usually found with credit cards.
Sell some of your investments.
Get a second job and save your earnings.
Skip a year's vacation.
Borrow from your parents. Many parents are willing, or even anxious, to help their children with the purchase of a first home. Be respectful of their generosity.

Buying a home, especially a first home, is a big financial and emotional step. Do your financial homework. Investigate your mortgage options. Some lenders, including First Tech offer a 0% down loan option. Determine what level of monthly mortgage payments will be affordable and comfortable. Use some discipline to save your down payment.