Ever wonder exactly how much money you need to save per month to afford a typical down payment?
Saving just $600 a mont or $300 a pay check can help you afford a mortgage down payment in just 1 year!
According to an article on Oct 23 by Grow.acorns.com
Buying a home is a lifelong dream for many Americans and can be an important step in building wealth for the future. For a lot of younger people, it can also seem forever out of reach. It may come as a surprise to know, though, that you can get a new place with much less than the traditional 20% down payment.
“The idea they’ll need 20% keeps a lot of people from taking the plunge,” Andy Taylor, who runs the mortgage team at Credit Karma, told Grow last year. Many banks and financial institutions allow consumers to pay a smaller amount upfront. The median down payment is only 7.6%.
Lenders often ask for a minimum between 5% to 15% to obtain a mortgage, according to Bankrate, and certain types of federally backed mortgages require as little as 3.5%.
In select instances, you can even get away with putting nothing down.
While it makes sense to run your own figures based on home prices where you’re looking and on the kinds of mortgages you qualify for, this breakdown of how much you’d need to save per paycheck to afford the typical down payment in a year can serve as a guide. Assume you’re buying a home for the national median price of $259,906, according to Zillow. If you are paid biweekly, you can likely expect 26 paychecks in a calendar year.
For a 3% down payment ($7,797) after 1 year: $300 per paycheck
For a 7.6% down payment ($19,753) after 1 year: $760 per paycheck
For a 20% down payment ($51,981) after 1 year: $1,999 per paycheck
So if you save $300 per paycheck, you could have enough for the down payment on a home in just a year.