One of the biggest concerns for new homeowners is the financial aspect of buying a new home. Can they afford the down payment? The monthly payments? What other costs are involved that we may not know about?
Today we are going to tackle the down payment - often the largest upfront cost to buying a new home.
A down payment is the money you give to the seller of the home. It is a portion of the overall cost of the home. The rest of the home cost will be mortgaged over time.
For example, a typical down payment is 20%. If your home costs $100,000 then you will pay the seller $20,000 and take out a mortgage for the other $80,000.
How much of a down payment you will need to have depends on your financing. Typically the higher your down payment is the lower your interest rate will be.
A down payment can come from your own savings over time, the money you make after selling your current house, or from gifts/grants from others.
There are many ways to begin saving for a down payment such as setting aside a little money each month, saving any tax refunds or gifts, set up automatic transfers from your checking account to a savings account with interest.
Remember your end goal - a brand new home for your family. This makes the saving process a little less painful and reminds you of the big payoff in the end!