How long will it take?
When saving for the down payment to your home, remember that the more you can save, the better. It’s true that, depending on what type of loan you are eligible for, you can get a fairly low down payment requirement. FHA loans can require as little as 3.5% down payment, and some other loans require as little as 5%, however…
The larger the mortgage, the more you pay.
Because you pay interest on your loan, the larger the sum and longer the life of the loan, the more you ultimately end up paying. Say, for example, you buy a $200,000 home with a 4% interest rate. If you take on a 30-year loan, you would pay more than $140,000 in interest.
The ideal scenario would be to buy a house outright and avoid all that interest. We of course know that is simply not possible or practical for a vast amount of people looking to buy a home.
Save as much as you can, and don’t rush into buying.
There are benefits to saving enough for a 20% down payment if it is something you can manage. For example, any home mortgage that doesn’t reach the 20% loan-to-value level will have private mortgage insurance added to the monthly payment. That means that you will pay between 0.5% and 1% of the loan amount annually for this insurance.
Even if you can’t save up for a 20% down payment, giving a higher down payment will ultimately save you money. Put back as much as you can. Take on part-time or freelance work and penny-pinch where you can. It’s better to wait longer and save more than it is to have a home sooner and ultimately end up paying much more than the original worth.
Stonebridge Mortgage Group Offers Guidance On All Mortgage Matters
If you have more questions about the particulars of home buying, you can rely on Stonebridge Mortgage Group to help guide you through the home buying process. We help get you pre-approved for a mortgage and assist with real estate loans and other mortgage solutions — both residential and commercial. We serve the greater Portland area and are located in Gresham, Oregon.