7 most important tips to save for home down payment
Whether a flat, an apartment, or a villa; the investment in any one of them is of a lifetime value, and for the same reason, there would be immense pressure upon home buyers (especially first-timers), once they have made up their mind to own their dream home.
The availability of several home loans with reasonable interest rates these days has definitely made the dream of owning a home attainable, for many. But the real challenge lies in saving up enough funds to cover the down payment and closing costs, which can be a painstaking process.
You don’t have to worry. We, Veegaland Homes, the most trusted builder in Kerala have figured out some way to save for down payment. Let’s take a look at the 7 most important tips to save for home down payment:
1. Know your budget
One of the most important tips to save for home down payment while planning to buy a home is to know how much you can afford on your new home. The amount required for a down payment will vary based on your financial situation and the price of your prospective home.
Once you have finalized the price change of the home you’re looking for, you may apply for the loan. Loan programs can range anywhere from 2 percent for a down payment to as much as 20 percent, based on the purchase price of your new home. With buying a home being a balancing act, always remember that the higher the down payment, the lower the monthly mortgage payment will be.
2. Analyze your expenses
Analyzing your monthly expenses taking into account your monthly income is the second step you can do while trying to save for a down payment. It can be anything and everything from your grocery expenses to loan payments or credit card debts. This way you’ll easily be able to get track of where you’re spending every month.
Generally, your housing expenses (mortgage payment, property taxes, and home insurance) would itself account for about a third of your monthly income. Therefore, make sure to have an idea of all your monthly expenses while deciding how much you can spend on mortgage payments. This is the same criteria on the basis of which, a lender evaluates your ability to repay a loan.
3. Lower your expenses
Once you’ve examined your monthly expenses in regard to your monthly income, you will be able to have an understanding of where you can reduce or eliminate your expenditure. The saved amount can then be put into your down payment savings account. This is one of the best way to save for down payment.
Even though practices such as impulsive buying (online shopping) and getting takeouts might be the trend, always make such purchase choices only after taking your balance or savings into consideration. Quitting such unhealthy spending habits will obviously contribute to your down payment fund.
4. Maintain a separate saving account
Maintaining separate savings account exclusively for your down payment that can make your monthly contributions automatic would be an ideal and convenient way to save for down payment.
This practice can be extremely helpful for people who have trouble managing their money. Once you make your money less accessible, you may be obviously less tempted to buy things that you don’t actually need.
While going for an automated withdrawal account, always make sure to schedule the withdrawal on your payday or once you know you’ll have enough money for the home down payment. Because overdraft fees can put a serious impact on your down payment fund.
5. Look into government schemes
Most of the states or cities have government schemes or down payment assistance programs that help first-time homebuyers with part of their down payment as an interest-free loan or by offering housing loan discounts.
Such government loan programs might require comparatively lower down payments than conforming loans plus better interest rates. However, in order to qualify for such programs, buyers would require to meet specific requirements like income, the location of the property, credibility, etc.
6. Reduce your debts
One of the primary aspects that lenders look for while considering you as a mortgage candidate is your debt-to-income ratio (DTI). Therefore, the more debt you have as an individual, the less favorable you turn out as a mortgage candidate. This means you’ll be paying more in interest and will have a higher down payment requirement.
Therefore, spending some time doing a check on your credit cards, loans, and EMI’s and taking an effort afterward in reducing your debt before applying for a mortgage loan would be a practical way to save on a home down payment. Paying off higher interest rate credit cards or transferring your credit card balances to a card (at a minimum) with the lowest interest rate are also alternatives.
7. Avail a loan
In case you lack the funds for making a home down payment, there is no better option than to avail of a loan. Soft loans (loans with little or no interest rate), personal loans, HDP (Home Down Payment) loans, and pleading securities, etc. are various means to avail a loan.
Opting for a loan against our life insurance policies or provident fund can also be considered and you may repay them over time with your savings.
Realizing the authentic construction quality and luxury beyond words, into its flats and apartments, Veegaland Homes has proven expertise in on-time delivery of dream apartments in Kerala, finished with state-of-the-art design and world-class amenities.
Real Estate Regulation Authority (RERA) registered Veegaland Homes’ flats and apartments in Kerala have sample homes to offer the first-hand experience to the interested buyers. To know more about our ongoing and upcoming projects, please visit: veegaland.com