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Prospect Financial Group, Inc.

How To Save Up for a Down Payment

Wednesday, November 27, 2013 - Article by: Prospect Financial Group, Inc. - Prospect Home Finance - Message

Purchasing a home is a very large investment, probably one of the largest investments you will make in your life. Getting approved for a home loan can be a rather complex process and you will need to meet a number of different requirements. One of the most important parts of buying a home is coming up with the money for a down payment. Depending on how soon you want to make your home purchase, you can either consider a short-term or a long-term savings plan.

With a short-term savings plan you will want to save as much as possible. Saving 20 percent of your monthly income before taxes can help you reach your goal of becoming a homeowner quickly. For example, if you make $80,000 per year, you will put aside $1,333.33 a month. In a year and half you will have over $20,000 saved, which can be a large enough down payment to purchase a home. If you are considering more of a long-term savings plan, put aside ten percent of your pre-tax income. This will allow you to come up with the savings for your down payment in twice the amount of time.

Hopeful homeowners can also tap into their 401(k) or IRA accounts to borrow money for their home purchase. The money in a retirement savings account accumulates much faster than the money in a regular savings account, which will give you a higher return and help you reach your goals faster. If you have problems putting aside money each month, set up automatic transfers to help you stick to your plan.

There are also a variety of loan programs you can choose from a home buyer. Some loan programs do not even require a down payment and some require a down payment of at least 10 percent. In order to avoid paying a monthly mortgage insurance premium, you will want to make a down payment of at least 20 percent on your home purchase - this will keep your mortgage payment lower.

To explore the different loan programs that are available to you and the different down payment requirements, give Prospect Financial Group, Inc. a call today at 858-605-0952.

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