Saving For a Down Payment

As a country, Americans have not been the best at saving money. A report recently released by the Bureau of Economic Analysis, charts our efforts to save, continually spiraling down, and it indicates the amount we save is minus half a percent. With this in mind, it is easy to see why first-time homebuyers struggle to find a down payment.

Today, the preferred down payment is normally 20%; however, very few people have that much ready money on hand. Although many lenders offer mortgages with less than a 20% down payment, it always makes more sense to save up as much as possible. A down payment has many advantages, as the more you put down, the lower your mortgage will be, which means lower mortgage repayments.

Additionally the higher the down payment is, the more you will be able to pay for a home. Lenders have learned from experience that more homeowners default on their mortgages if a down payment is less than twenty percent of the sale price and for this reason they require you to pay private mortgage insurance until the equity in your home reaches twenty percent of the sale price.

So here are a few helpful tips to help you start saving:

Try saving your tax refund. Change you withholding payoff from 1 to zero. This means your employer will have to pay more to the I.R.S and downgrade you paycheck accordingly. In this way you may receive a larger income tax refund.

Will your parents give you a down payment? The law allows each parent to give a gift of a specific amount without any tax consequences. If this is not possible you may be able to ask them for an unsecured loan, where you give them a better interest rate than they can get from the bank.

If you have served in the armed forces, it is always a good idea to check out government programs, as you may meet the criteria for a loan sponsored by the Veterans Administration.

The government is also running a number of assistance programs for down payments, tailored around the first time homebuyer. There are also neighborhood specific programs to help encourage home ownership in some neighborhoods.

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