Savings Calculator Helps with Planning for First Home Purchase

The primary obstacle for first-time home buyers is meeting requirements for down payments and closing costs. Planning ahead by making monthly contributions to a dedicated savings plan can help you raise the funds needed for meeting these expenses. Here's how using mortgage calculator tools can help you meet your savings goals.

Mortgage Loans: How Much Do You Need to Save?

Conventional mortgage loans typically require ten to twenty percent down with an additional three to five percent for closing costs. Although it may be possible to negotiate some closing costs, or have the seller or lender pay all or a portion of closing costs, it's best to design your savings plan with paying all closing costs in mind. You may also find lower down payments for FHA and VA loans, and state and local home buyer programs.

Saving five to ten percent of your estimated purchase price can prepare you for meeting lower down payments and closing costs. Down payments may be as low as 3.5%, but again, it's wise to plan for paying closing costs.

Free Online Calculators Assist with Estimating Affordability

When planning to save over a period of years, it's impossible to predict exactly how much you'll need to save, as home prices and mortgage rates fluctuate. The best you can do is estimate based on current rates and home prices, and add a cushion. Using a mortgage pre-qualification calculator can help estimate how much you can borrow for a home loan based on estimated gross income, mortgage rate, property tax rate, amount available for down payment and closing costs, and other installment debts.

You can experiment with this calculator to get an idea of how much you'll need to save. Even if you fall short, it's better to have some savings toward your down payment and closing costs.

Savings Calculator: Planning Your Savings

It's important to save for emergencies and other unplanned expenses, but your home savings account should be separate to avoid withdrawals. Use the savings calculator to estimate monthly deposits based on how much you want to save, the interest rate on your savings, and how long you'll be saving. Although experimenting with various scenarios can help you plan, mortgage calculators can only provide estimates and don't factor in changing home prices, savings and mortgage rates, or other potential costs.