You may think that buying a house isn’t in your realm of possibility. In fact, you may even feel a wave of panic just thinking about where to get the money for your down payment.

Fortunately, most lenders today offer a wide range of down payment options between 5%-20% of the price of the house. For many first-time homebuyers, a FHA loan can be obtained for as little as 3.5% down. 

Here is what you need to know when it comes to making a down payment.

Why big down payments are better:

• Smaller monthly payments: Homeowners with small down payments will find themselves with larger monthly mortgage payments.
• Less risk for the lender: While low down payments loans are available, lenders prefer to write loans with larger down payments. You’ll have a larger choice of lenders to choose from.
• Competitive interest rates: A bigger down payment increases your chances of getting a loan with a lower mortgage interest rate.
• No mortgage insurance: If you choose a loan that requires less than 20% down payment, your lender may require you to pay private mortgage insurance (PMI). The PMI is usually tack on to your monthly payment until you’ve built 20% equity.

Ways to save for your down payment:

• Track your spending. If you have a hard time sticking to a budget, use an expense tracker app or excel spreadsheet that can hold yourself accountable each month.
• Don’t spend your tax refund! If you’re expecting a tax refund, bonus, or any sum of money this year, give that cash some purpose by sending it straight towards your down payment fund. 
• Kick nonessential spending. By making small cuts or sacrifices in your daily routine, you’ll be amazed at how much money you can save. Make your own gourmet coffee! 
• Direct deposit. Set up a separate account for your down payment saving. 
• Nix credit cards. Reduce your credit card debt by only using a card for emergencies.

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Source: Hayley Hamre- Realtor at Hoss Group Realty