Preparing to purchase your first home or a new larger home takes a lot of work and consumes a lot of time, especially when it comes to the money. No one wants to overpay for a home they could have gotten for a less and no one wants to lose the perfect home because they didn’t offer enough, this is why it’s really important that you educate yourself about the whole process. The down payment is often considered one of the more complicated parts of the buying a house, people sometimes don’t realize that the down payment can be a very large amount of money. Down payments usually take a couple of years to save for, this shouldn’t worry you as having the right amount saved is one the best things you can do before you decide to purchase a house.
The down payment is typically a percentage of the loan you’ll need to buy the house. The down payment is only one of several things involved in the mortgage approval process but it is essential. Here is all the information you need to know about down payments.
Obviously the total amount of your down payment depends on many different variables including, your lender, your past financial history and the house you’ve chosen to buy. But, generally speaking the average home buyer can expect to pay 20% of the price of the house for their down payment. 20% might not seem like that much but we’re talking about 20% of the price of as house not 20% of a bill at a restaurant. Here’s an example: If you decide on a house that costs $300,000 then you’ll need $60,000 to put as a down payment. Most people don’t just have $60, 000 lying around and this is why it’s important to know what you can afford and start saving for it right away.
It’s also important to note that your bank or lender could require less than 20%, but then your interest could be higher. Furthermore, if you have more than 20% saved you should consider not putting it all into your down payment. It’s a better idea to have some extra money saved for an emergency fund just in case.
A down payment might seem like an unnecessary annoyance that is simply there to cause you stress, but we assure you that it is a completely necessary evil and here’s way.
Before you head to the bank for a mortgage and before you start looking for the perfect home you need to start saving. Saving is potentially the hardest part of the whole home buying process and can take years. The saving process will put strain on your personal finances and you’ll definitely need to make some changes in the way you spend your paycheques. There are endless ways to save money based on your current financial situation and your lifestyle. Here are a few ideas to help you get started.
No matter how you decide to save money it’s important that you start as soon as possible and take it seriously, purchasing the home of your dreams depends greatly on how much you’re able to save. Moreover, implementing cut backs and good spending habits into your life before you buy a house is one of the best things you can do for yourself. Once you’ve bought a house the costs don’t end and your savings will start to drain.
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Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.
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