Use Free Mortgage Calculators in Creating a Savings Plan for a Mortgage Down Payment

February 04th, 2010

Saving for a mortgage down payment is one of the most important steps to take toward successful home ownership. You’ll have a better shot at qualifying for a good mortgage deal if you have a sizable down payment and you’ll have an easier time affording your monthly mortgage payments once you own a home.

Follow these five steps to save for your first mortgage down payment.

Use Free Mortgage Calculators

1. Set a mortgage down payment goal. The more you save, the more house you’ll be able to afford and the less your monthly mortgage payment will be. To figure out how much to save, check prices of starter homes in the neighborhoods where you’ll be looking to buy. You’ll need at least 3.5% of the sales price for a down payment for an FHA home loan, which is geared to buyers who don’t have a lot of cash to put down. Use a home affordability calculator to get an idea of how much home you can afford based your income, estimated down payment, and current interest rates. Use the home affordability online mortgage calculator to get this number.

2. Boost your income, and put the extra money in savings. Get a temporary part-time job or freelance, and put everything you earn into a savings account.

3. Track your expenses for a month. Write down everything you purchase and fill the budget cracks. Small expenses can add up over time, and often they provide little fulfillment. Cutting out $20 a week on fast food, for instance, would save more than $1,000 in a year, and you’d be healthier to boot.

4. Use the savings calculator to determine how much you’ll save by a set date, given the amount of money you set aside each month, the interest rate, and the number of years or months until you buy your home.

5. Make savings automatic. Decide an amount you can save each month for your mortgage down payment and have that amount, plus money for any other savings goals, deducted automatically from checking to savings. Use high-yield savings accounts or certificates of deposit to earn as much interest as you can.

Like losing weight, getting fit, or any other worthy goal, saving money takes time and discipline. And of course it’s worth it.

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