Did you know that saving for buying a new home has recently got easier? Both Freddie Mac and Fannie Mae claim that they will get mortgage loans with as little as 3% down payment which is a huge drop from minimum 5%. Although conforming loans are pretty easier to get as down payment requirements will be reduced yet there is still a matter of saving for a down payment and for the closing costs.
It might feel like the biggest hurdle when it comes to saving so much money but if you check the data revealed, around 1.4 million buyers purchased their first home in 2016 and this number is going to increase in the near future.
The inevitable shortage of savings
It was a fact previously that America was a nation of savers and it was in 1975 that the savings rate hit 15% within the second quarter. However, things have changed dramatically. Saving is practical when income surpasses spending but records reveal that there has always been less income and hence the opportunity to save was always less. As per figures from Census Bureau, household income was 9% lower than the previous years.
Once you tend to combine low income with high costs, you will see that the reduction in savings will become inevitable. Although it is hard but at the same time it is possible too. You just have to take into account the bigger picture.
Tips to save money for a home loan down payment
Unless you’re someone who is uber rich and famous, the odds are that you will have to gather money for buying your own house. So, how can you boost your savings? Here are few steps to take.
Step #1: A savings account should be opened
Open an online savings account either online or at the bank where you now have your checking account. Convenience is the main reason behind taking resort to such an institution. Majority of the credit unions and banks transfer funds from accounts instantaneously and electronically. This way you can move in money into your savings from the checking account.
Step #2: Start following a budget
One of the easiest ways in which you can motivate yourself in following a budget is by utilizing a spreadsheet, show the monthly income and then deduct the taxes from your pay statement. This will give your net income post taxes and show what you pay for monthly costs like student loans, rent, auto loan payments and credit card bills. You can also use a mortgage calculator to keep track of your savings.
Step #3: Check the credit score
Your ability to borrow and the interest rate which you pay are dependent on your credit score. Your credit score will be based on the credit reports, electronic files and other things like where you have accounts, how much you’ve borrowed, the total debt that you owe and late or missed payments.
Therefore, you have enough options to save for a handsome down payment. Make sure you follow the above listed options to save the correct amount.