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SAVING FOR A DOWN PAYMENT ON A HOME

If you have been renting your residence for quite some time, you have probably considered buying a home on numerous occasions. While people's individual reasons for renting vary substantially, for many the main motivation is practicality. Especially for younger people in college and working on gaining solid ground in their careers, renting can be a more affordable and easier option than attempting to purchase a home. Likewise, those who occasionally move due to their careers usually find it simpler to rent rather than going through the buying and selling procedures multiple times.

Whatever your personal incentive for renting and leasing in the past, you may have reached the point where settling in one specific location for the duration is the prudent solution for you. When you do reach this point and make up your mind to proceed accordingly, you will probably find yourself conducting a great deal of research into what it takes to purchase a home that will be affordable for you. You may look into mortgages, the market value of residential structures in a certain area, energy efficiency considerations, and much more. One of the principle things you will find it helpful to account for is the down payment.

Improving Your Credit Rating

The first thing you should know about the particular amount you will be required to pay for your home is that it is normally not fixed in stone. When you initially moved into the apartment, townhome, duplex, or other rental property where you currently reside, you most likely went through an application process that determined at once if you were eligible to rent the apartment and what kind of security deposit you would need to pay. In some ways, your process of buying a home will be similar. If your credit rating is abysmal, consider paying off your credit cards because you will naturally find it harder to become qualified for a bank loan in the first place. Your credit also matters, more specifically, when it comes to the down payment.

If a loan institution determines that you present a low enough risk that they are willing to extend a loan to you but your credit score does not yet rank among the more stellar ratings they review, you may find yourself required to put down a significant amount in order to secure your approval. Some prospective home buyers in the past have used their ability and willingness to plunk down a sizable down payment to their advantage. For instance, if your credit rating is not the best and a bank is leery to financially back you in your intended home purchase, you may be able to sway them by offering to pay a down payment much larger than a standard one. Naturally, this will only be helpful to you if you have previously been able to allocate funds to this purpose.

Saving as You Go

Saving for a down payment on a home is typically a multifaceted process that takes time to complete. If, for whatever reason, you receive a significant lump sum payment, you might be tempted to dedicate this amount solely to your down payment and proceed into the buying process right away. What you will need to consider before doing so is whether you are prepared to handle the ongoing monthly payments associated with ownership, even if you have the down payment secured. Usually, renters make it a point to set aside a certain portion of their regular income on a monthly basis. Try to find a higher interest savings account with little to no penalty fee for early withdraw as a means of saving as you go.

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