If you're trying to put together a down payment for your great American dream, take advice from financial experts to make your new home a reality sooner than you might expect.
While it’s not necessary to plunk down a full 20 percent for a down payment, it will get you more house and a lower mortgage payment, notes the National Association of Realtors.
First, determine how much you can actually afford to spend on a home, noting that your mortgage payments, including property taxes and insurance should not exceed 28% of your pre-tax monthly income, advises CNN Money. If your income varies monthly you may want to keep your housing payments at 20 percent.
Establish a savings plan to determine how much you need to set aside each month to reach your downpayment goal and in what period of time, adds CNN Money, which shares the following example: If you plan to save $45,000 for a down payment with a time frame of five years, you'll need to save about $9,000 per year, or $750 per month.
Small savings add up. Giving up your gourmet coffee and bringing a sack lunch to work instead of eating out are a way to start, and can add up to thousands without making huge sacrifices, adds NAR. Keep track of how much you spend on entertainment; maybe cancelling cable or eating dinner out less often, and renting a movie rather than going out to the movies. Deposit the money you save in an interest-bearing account.
Save more and faster by getting a side job or investing in stocks, says CNN Money, which advises keeping your stocks to no more than 25 percent of your down payment, to be on the safe side. Put the bulk of your money into a savings account or a money market account to earn interest.