Saving for a Down Payment

Saving for a down payment on a home can be one of the most challenging tasks a young family faces in the quest for home ownership. Creating a down payment savings plan and sticking to it will help potential buyers reach their goal of home ownership faster.

The purchase of a home entails saving for three up-front costs. The down payment is the largest part and is a percentage of the total purchase price of the house. As the economy has improved and home prices have stabilized in recent years, down payment requirements in New England have dropped considerably. Today, first time home buyers can purchase a home with a down payment ranging from three to five percent of the purchase price.

In addition to a down payment, funds are needed to cover closing costs. Closing costs include all fees required to execute the sales transaction, such as attorney fees, title insurance, appraisals, points and tax escrows. While these charges vary considerably, most home buyers will need at least $3,000 to $5,000 for closing costs.

Finally, home buyers need to show that after paying the down payment and closing costs they will still have some reserve funds to protect against short-term cash flow problems. Ideally, a home buyer will have at least three months' worth of housing payments available after closing. These funds do not need to be paid out; they simply remain in the home buyer's savings.

As an example of total cash required, a home buyer purchasing a $200,000 home with a $1,750 monthly housing payment would need to have approximately $20,000 available. This includes $10,000 for a five percent down payment, approximately $5,000 for closing costs and about $5,000 in payment reserves. After closing, the home buyer would have $5,000 left over.

For many first time home buyer programs, 2% of the down payment can be financed along with a portion of the closing costs, and reserve payment requirements can be reduced. These programs can decrease cash requirements from over $20,000 down to less than $12,000 in the same example.

Do you make enough to pay the lender back?

Your lender will want to know not only how much money you have, but how much you will likely make over the next 30 years. Also, what are your other debts? Do you owe money for college loans or credit card charges? Do you have any other assets? Things like stocks and mutual funds or personal property like a boat or a car are also considered in figuring out how much a bank will lend you.


Ideally, you will want to come up with at least 20% of the value of your new home as a down payment, to avoid things like mortgage insurance payments. But, you probably qualify for plenty of financing arrangements that will get you into a new home for as little as 3% of the asking price. We'll talk more about mortgages and those special programs later.

The lender will also plug your income numbers into a couple of formulas: the front-end ratio (having to do with your mortgage payments) and the back-end ratio (having to do with your debt).

Based on the requirements outlined above, future home buyers can develop a savings plan that will help them achieve their goal of home ownership in the near future. Since the down payment required depends on the purchase price, a home buyer should meet with a mortgage lending professional to determine how large a mortgage can be obtained. The maximum loan amount will determine the approximate price range in which a home buyer should be looking. For example, a home buyer whose income will support a mortgage of $190,000 can look for homes with a price of about $200,000 and plan to save a down payment of about $10,000.

Before starting a savings plan, a future home buyer needs to determine his or her current financial position. This includes reviewing all assets and liabilities, developing a budget and planning how much to save each month. When analyzing total current assets, a consumer should not overlook any source of funds. In addition to all checking and savings accounts, many people have CDs, stocks, mutual funds and savings bonds. Retirement funds such as a 401k or an IRA can be counted toward the payment reserve requirement. Some 401k plans even allow employees to borrow against the plan. Proceeds from borrowing against one's own retirement funds can be used toward a down payment.

By subtracting all current financial assets from the amount of funds needed to purchase a home, one can determine how much needs to be saved. A cash flow budget should then be prepared to determine how much can realistically be saved monthly. Some sacrifices of non-essential items may need to be delayed temporarily in order to meet each monthly goal! No matter how a home buyer accumulates funds to purchase a home, careful planning will always smooth the road to home ownership.

Article continued at

Make money at home Make money at home or online.

Make Money Online Website which offers a wide selection of work at home programs people can join to earn extra income.

Marathon Florida rentals New Edition Resorts Luxury vacation rentals located in Marathon of the Florida Keys

MedVitamins Over 3,000 specialty health products available for delivery to your door. Specializing in products for Optimal Health, Fibromyalgia, Chronic Fatigue and complimentary Cancer Therapies.

MERCHANT ACCOUNT USA Merchant Account provides low cost merchant account solutions.

Merchant Accounts Payment Gateway, Merchant Account and Online Credit Card Processing Services by AboutCSI.

Merchant Account & Credit Card Processing Business credit card processing and merchant services - Learn how to avoid the 10 major pitfalls when setting up a merchant account!

Mike Grbic Team Realtors search for homes

M-NCMB: Mortgage Lenders & Loan Resources - a growing mortgage web site offering list of mortgage lenders nationwide and various tips on mortgage loans, debt consolidation, and financial resources.

NCMB: New York Mortgages & Refinance - Licensed mortgage lender providing home loans, debt consolidation, mortgage refinance, etc. Good and bad credit are welcome.

Moms with a Spine Your one-stop-shop for home based businesses, work from home jobs & work at home ideas.

Mortgage Credit Problems Easy Online Mortgage, Refinance and Debt Consolidation Home Loan Approvals with Bad Credit!

Mortgage Loans Web

Mortgage Loans & Payday Loans provides up-to-date information on various types of loans for your home, auto, boat, personal, and small business financing needs

Mortgage Rates USA Use our site to shop for low mortgage rates and lenders in all 50 states. We also have many informational pages detailing the mortgage process and monthly industry specific articles.

Music instruments

My Life Coach Get the career counseling you deserve. We specialize in helping others find their dream job through personality assesments.

National Mortgage Note Buyer We pay top dollar for 1st position real estate notes, nationwide. All property types. We pay all closing costs and related fees. Free online or phone-in quotes.

New Millennium Finance

New Millennium Finance

North Carolina Mortgage Loans - Southern Fidelity Mortgage offers competitive mortgage rates and easy qualifying for your North Carolina mortgage loan - VA, Conventional, Arm, Rural Housing, First Time Homebuyer, Non-conforming or stated income.

OFFSET PRINTING South California offset printing company, catalogs,brochures,presentation folders,flyers.

Omega 3 Fatty Acids Supplements, Nutrition, Health, Alternative Health, Nutritional supplements

Online Blackjack - Casino Blackjack Game BlackJack Babe helps you find the best online blackjack casino games

Online Casino Deals at Searchable casino directory featuring casino reviews and ratings, payout and bonus info.

Online Casinos Casino domain is a comprehensive directory for the best online casinos, committed to rating the best online casinos on the net.

Online Casino Guru's Best Online Casinos Online Casino Guru helps you locate the best online casinos based on quality, bonus and payouts.

0nline Credit Repair Office Your complete credit repair program. All your credit repair needs, including getting a free credit report, credit repair programs, where to get a debt consolidation loan, bankruptcy information and how to rebuild credit.

AOC's Online Casinos-Online Gambling Provides reviews of the best online casinos and online casino ratings.

Online Casinos 101 Best Online Casinos is a comprehensive review of online casinos.

Online Gambling Gambling can be a great form of entertainment if handled with the right approach.

Online Loan Calculator - Offers mortgage, financial, and auto loan calculators... - money, loans, financing Loans for mortgage/home equity, automotive, payday, student and other financial loan services

Online Poker - Video Poker Games Poker Online Video Poker helps you find the best online poker and video poker games.

Online Poker Room Poker Room brings you the best in live, multi-player poker.Experience the thrill of playing the world's most popular card game for real money.

Online shopping, jewelry, toys, games, shoes, baby clothes, computers, and clothing!

Online Slots - Casino Slot Machines Provides the best online slots and casino slot machines on the net.

Oppenheimer group Real Estate and Mortgage Website Design and
Your source for inexpensive Professional Full Service Internet Solutions - Website Design and Search Engine Optimization.

Order Adipex-P Buy Xenical and Compare Weight Loss Pills Effectiveness at LightPills - For discount computer hardware sales.   They are your computer hardware suppliers / computer hardware dealers for computer upgrades.  Custom built computers, consumer electronics, home audio, & mobile audio also available.

Overnight payday advance cash loans No credit check payday advance cash loans deposited in your bank account after midnight. Owned and operated by WOMEN!


About Us | Home | Apply Now | Refinance | 2nd Mortgage | Debt Consolidation | Contact Us | More Resources | Refinance - Mortgage Refinance
Great Articles
Home Equity Lines | 8 Must-Ask Questions | 6 Ways to Slash Costs | Be Cautious With Debt | Refinancing
Choosing Your Mortgage | How to Save | How's Your Cash Flow? | How Much Can You Afford? | Cleaning Credit
When to Refinance | Save for Downpayment | Rebuilding Credit | Top 10 Tips| 6 Keys for Buying
Copyright 2002, Mortgage Refinance Loans & Lowest Mortgage Refinancing Rates. All Rights Reserved. Equal Housing Opportunity. Disclaimers