TIPS ON SAVING FOR YOUR DOWN PAYMENT

Are you feeling a little over crowded in that studio apartment you are currently renting or perhaps that little cottage no longer seems enough for your growing family.  You're thinking of buying but not sure how you will be able to come up with the down payment.  Here are a few practical tips to help you through the process.

1. Assess your housing needs

    Asking a few simple questions will narrow your focus and help you on the path to saving for the down payment.

    1. How big of a house will I need, i.e. number of bedrooms and baths?

    2. What is the average price of the house I am looking to buy?

    3. Do I want a move-in-ready house or will I need to make renovations?

2. Assess your finances

   There is the "28% rule" which states that a household should not pay more than 28% of their monthly income on housing expense.  So, get out some paper and a pencil and do the math.

   How much do I spend on the following expenses:
        a. rent
        b. utilities
        c. taxes
        d. insurance
        e. mortgage (if I already own)
        f.  miscellaneous maintenance

   What is my total monthly income?

   How much disposal monthly income do I have available for a down payment?

3. Seek expert advice

     Armed with the results of the assessment of your housing needs and finances, you need to take your findings to a professional to further refine your data.

     A. Real Estate professional - a real estate professional will help you understand the current real estate market in your community and provide you with housing options to meet your needs.

    B. A Bank or Lender - a banker or lender will review your finances and evaluate the amount they would be able to lend towards the purchase of your next house.  They will also provide you with information about the types of loans you are eligible to receive.

4. Save for the down payment

   Saving for your down payment will also depend on how much you plan to put down, either 10% or 3%.

   Example: Saving for a 10% down payment in Washington state may take upwards of 4.69 years;  while in South Carolina it would take 1.9 years.

  If you qualified for a 3% down program the time in Washington state would be 1.4 years and in South Carolina it would be .05 years.

TAKE AWAY:  REGULARLY BE PUTTING ASIDE A STATED AMOUNT OF MONEY TOWARDS A DOWN PAYMENT ON A FUTURE HOUSE.  

Being one step ahead of the game may bring you two steps closer to your dream home.