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Accumulating a Down Payment on a Home
Figuring out how expensive of a house you can afford will largely depend on the level of your monthly payments. There will be property taxes, insurance and upkeep, but your monthly payments will probably be the most important part of your decision.
The fine line you walk when determining a level of down payment is based on the level of mortgage payments you can afford and how much money you have for the down payment. Mortgage rates are constantly changing and there are all different types of mortgages available.
Estimating your mortgage payments
Here is a chart showing monthly payment levels for different amounts at different interest rates. It reflects using a 30-year fixed mortgage. Payments with a 15-year mortgage will be higher, but you will pay off the mortgage sooner and pay much less interest over the life of the mortgage.
Sample Monthly Mortgage Payments for a 30 Year Fixed Mortgage
Many financial websites include mortgage calculators to provide more precise payment levels and you can also calculate mortgage payments for other lengths of mortgages.
Accumulating a down payment
Most lenders require certain levels of down payments to consider you for a mortgage. It often ranges from 5% of the purchase price to 25%. The larger the down payment, the more comfortable they will probably be approving your mortgage. However, you should also remember that it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture or improving the landscaping all take money. You should not stretch yourself too thin.
Here are some ways to consider to build funds for the down payment.
Buying a home, especially a first home, is a big financial and emotional step. If buying a home is important to you, do your financial homework. Investigate your mortgage options. Determine what level of monthly mortgage payments will be affordable and comfortable. Use some discipline to save your down payment.