Question:

How to save for a down payment on a home?

Answer:

First time home buyers often have difficulties saving for a down payment on a home. Even though it is possible to get a no down payment mortgage, or use down payment assistance grants, a borrower is typically expected to save for:

  • down payment;
  • closing costs as house appraisal, title check, lender / broker fee, escrow funds;
  • several months' mortgage payment reserves.

It is possible to possible to reduce the amount to save for a down payment on a home by having the lender or seller finance some of the costs, use a local down payment assistance program (DPAP), or obtain gift funds from relatives.

If you decide to finance a down payment and closing costs on your own, you should save for at least 5% of the loan amount for down payment, and some other 5% of the loan amount for closing costs and several months' reserves.

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