Tips to financially prepare to buy a home

Expert: Practice paying your expected mortgage before buying your home
Published: Mar. 2, 2023 at 4:05 PM EST
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InvestigateTV - The average home buyer saves for four years before making a purchase, according to the National Association of Realtors. So, experts recommend if you plan to buy a home the time to start saving for a down payment is now.

Virginia Credit Union financial coach Cherry Dale said there are many different options for down payments.

Dale said your first step should be to contact a loan officer to discuss the best option for you. While there are loans where you can put 0% down, most lenders recommend you put down 20%. So, for a $300,000 house, you would need a $60,000 down payment.

Once you know how much you’ll need for a down payment, Dale recommended setting up a separate savings account just for it. She suggested you make automatic contributions and put any bonus, tax refund, or unexpected income into that account.

Dale also pointed out that while saving for a down payment, you should also prepare for any difference in what you are spending on housing now and your eventual home payment.

For example, if your home will cost $500 more per month than your rent, you should start practicing paying the entire mortgage payment by putting the extra $500 into a savings account.

“So, you’re pretend paying that mortgage before you actually get in there and then you can know if it fits your budget without being overwhelmed with the thought of defaulting on a mortgage,” Dale said.

Lastly, Dale suggested that you put a time frame on your goal. Figure out how much you need to set aside each month, so you can realistically be ready to buy your home.

The Department of Housing and Development (HUD) has a comprehensive guide for anyone looking to purchase a home.