Saving for your next home’s mortgage loan can be a complicated undertaking. When it comes to payments, interest rates, taxes, and refunds — the math of it all starts to become a blur. Here are four tips our mortgage lenders recommend to help you get started.
- Open a Separate Savings Account – An effective way to begin saving for a mortgage is to open a savings account dedicated to this purpose. Each month, save the amount of money you predict you would be paying for a monthly mortgage payment. Let’s assume you have calculated an expected mortgage payment of $1,000 per month for your new home. If you are not currently paying rent, you should start saving $1,000 every month as if you were already making monthly payments. Or, if you are currently renting for $800 per month, you could start saving $200 every month, as if you already had that larger monthly payment. Using this method, your savings will grow quickly. You will start to become financially comfortable with a larger payment added into your lifestyle. Additionally, the money you save could go toward your down payment when you are ready to make a home purchase.
First Mid offers a Smart Savings account that helps you establish your own automatic savings program, so you don’t have to worry about manually setting aside money each month. You can set up automatic deposits on a schedule that works for you. - Determine How Much Money You Need to Save – Another easy calculation to better help you save is to determine how much you expect to pay on your down payment divided by the time you expect to make the purchase. For example, if you plan to purchase a home in the next two years and you expect your down payment to be $25,000, that means you would need to save around $1,041 every month for the next two years. Planning your finances out this way allows you to see the big picture in a more attainable way. Playing with the numbers will help you understand where you should be starting.
- Put Away Your Extra Cash – Any surprise money that falls into your lap — work bonus, gifts, or tax refund — should be stashed away in your savings account. This is an effortless way to grow your savings. On average, tax refunds alone are around $2,800, which will quickly grow your savings account.
- Do Your Research – Many homebuyers are unaware they may qualify for financial assistance on their mortgage closing costs. At First Mid, we offer a credit on an appraisal for first responders*, including active military members, and veterans. We have VA loans for veterans and their surviving spouses. With Rural Development loans, no down payment is required if you meet the necessary requirements. With the Downpayment Plus® program**, you could qualify for up to $10,000 in closing cost assistance.
Learn more about our Low Down Payment Mortgage Options here. If you are interested in discussing these options further, fill out our Mortgage Lender Contact Form, and your local First Mid lender will contact you directly.
* First Mid’s First Responders program includes applicants who are: active military, Veterans, and all eligible paid or volunteer Firefighters, EMTs/Paramedics, Police (Police Officers, Sheriffs, Sheriff’s Deputies, Correctional Officers, State Troopers, 911 Dispatchers, and Federal Law Enforcement Officers).
**Downpayment Plus® is a program from the Federal Home Loan Bank of Chicago. Restrictions apply. Visit the Federal Home Loan Bank of Chicago’s website for complete requirements. Downpayment Plus® is a registered trademark of the Federal Home Loan Bank of Chicago.
