The real estate market is still hot, and now, interest rates are going up again. It is more important than ever for those looking at homes to have a substantial down payment ready. (This is particularly true for new home buyers who won’t have proceeds from a house sale to start with.) Not only will this lessen the amount a buyer needs to borrow, but a good down payment makes buyers more attractive to lenders.
The better a down payment on a house, the less risky the loan is for the bank. Buyers can lock in lower interest rates. A smaller mortgage, especially at a favorable rate, means not just lower monthly payments, but paying less interest over the life of the loan. A down payment of at least 20% of the home’s price can also help buyers avoid the need for costly mortgage insurance.
But knowing why a hefty down payment is a good idea, and figuring out how to save for one, are two very different things. Still, homeownership is a worthwhile goal. With some planning, determination, and a few tips and tricks, buyers can start working toward building a nest egg to use as a downpayment.