Saving for a down payment on a mortgage is the first big step in buying a home. It goes without saying that the discipline is putting money aside and also deciding where these funds are stored.
How much you will need to save?
When granting a mortgage, the bank needs an down payment to reduce the risk of financing other costs of the house. Banks prefer borrowers who can put down at least 20% of the price of a domestic house. If you have a very good balance or qualify for a specific program, you can get a loan of less than 20% or nearly no down payment. However, it should be remembered that programs that offer a low down payment or do not pay an advance usually require the borrower to pay private mortgage insurance (PMI) for an additional monthly fee. If you are required a 20% down payment this mears $60,000 for a $300,000 purchase.
Conversely, if you are considered a high-risk borrower due to credit history or other factors, the bank may seek a higher percentage of down payment before granting a mortgage. The higher the down payment, the lower the mortgage and the smaller monthly payment.
In general, monthly housing costs should not exceed 28 percent of stable monthly income. As an example, if your income is $ 5,000, you can safely spend $ 1,400 ($ 5,000 x 28%) for a future payment in your home.
The type of housing you should look for
In ski resorts and mountain towns, buying a house is expensive.
Make sure it’s worth buying. Buying a house is probably the biggest financial commitment in life. Be sure to buy instead of renting.
Calculate your home budget with rent. Use the monthly rent as a starting point to realistically pay all housing costs monthly.
Familiarization with the first home buyer program. These programs help you plan for a home purchase and educate you with the home buying experience.
Minimize your lifestyle and save money with the payment in advance. Within 1-3 years before buying a house, think about reducing your lifestyle to save as much as possible on your home deposit, closing costs and transfer costs.
Maximize your credit score. The higher the credit rating to a certain point (around 760), the lower the mortgage rate.
Consider the multi-family houses. Are you interested in becoming a homeowner? Both in the case of conventional payments (20%) and flexible advances granted by FHA or Freddie Mac, loans are available to owners of duplexes and small buildings (up to 4 units), so that you and your family can stay in other residential units.
The best place to store your down payment
Advances must be available easily and quickly, which does not include options such as long-term certificates of deposit (CDs).
1. Investment account
If you are thirsty for higher risk, you may decide to invest your advance in the investment account with a larger broker.
2. A savings account with high returns.
If you want to get more interest without sacrificing the safety of the FDIC insurance, choose a high-performance savings account.
3. Savings account
Depositing into a savings account at the bank where you apply for the loan may be the easiest option
Please contact Grand Mountain Bank at 970-887-1221 with any questions you may have about the home buying process. We would be glad to sit down with you and review your options.