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One of the biggest obstacles to buying a home can be saving enough money for a down payment– especially if your goal is to save 20% of the price of the home. Paying 20% down can benefit a homebuyer in multiple ways, such as reducing the mortgage loan’s interest rate, lowering the cost of monthly mortgage payments and eliminating the need for private mortgage insurance.
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Of course, there are a lot of factors that can determine how quickly you can set aside enough to make a down payment on a house. But there are steps you can take to help ensure you reach your goal sooner rather than later.
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Click through to find out what you can do each month to save for a down payment in five years or less to buy a house.
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Month 1: Get Familiar With the Housing Market in Your Area
Before you’ll know how much you need to save for a down payment, you need to have an idea of what you want in a house and how much that sort of house will cost. Winnie Sun, the founder of Sun Group Wealth Partners, recommends making a list of must-haves for your new home. It could be a certain neighborhood, proximity to good schools or your work, a specific number of bedrooms or a yard where your pets or kids can play.
Then research prices for local home listings online that meet your criteria. You might discover that you need to adjust your expectations. Of course, the housing market could change over the years as you save for a down payment. But you don’t want to work hard to save only to discover when you’re ready to buy that you can’t afford even the most modest home, or, the opposite, that you didn’t need to scrimp quite so much to come up with a down payment.
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Month 2: Figure Out How Much House You Can Afford
Once you get a feel for the housing market in your area and are ready to start saving, figure out how much house you can afford. To do that, calculate how much of a monthly mortgage payment you could handle on your own or with a significant other if you’re buying with someone else, said Emily Gowen, …….