To figure out how much you need to save for a down payment on a home, you first need to determine what you can realistically spend on a house. According to CNN Money, most lenders restrict your mortgage amount in order for your monthly housing payments, including property taxes and insurance, to not surpass 28% of your pre-tax monthly income. Aiming for a lower percentage such as 20% may be better if your income fluctuates. Other expenses as a homeowner to keep in mind are repairs, maintenance, utilities, and even home owner association fees if they apply.
The second step is to identify how much money you will be able to set aside each month to come up with a down payment. This will give you an idea of when you can start house shopping. A healthy down payment is about 20% of the purchase price but there are programs out there such as FHA loans where you can pay as little as 3-4% down if you have decent credit. Mortgage insurance is usually required when the down payment is less than 20%, which can cost up to 1.5% of the loan amount annually according to Bankrate.com. The Wisconsin Housing and Economic Development Authority website is a great resource to learn about the home buyer programs offered in Wisconsin.
Make your dream of being a home owner a reality! When you’re ready to start house shopping or are looking for a referral for a credible lender in the Lake Country area, we are here to help. Give us a call at 262-567-3611 or email us.