Loan officers come across people who have never owned a home, and don’t even know how to go about it. The American Bankers Association is offering tips to help consumers prepare for one of the first steps in the home buying process: saving for a down payment. Before transitioning from renter to home owner, potential buyers must typically save between 5 and 20 percent of the home’s value for the down payment – and it may not be as difficult as renters think!
First, develop a budget and timeline. What kind of home does the renter have their eye on? What is the price estimate? Determine how much the borrower will need for a down payment, and then work backwards to create a budget and calculate how much should be, and can be, saved every month. That will help the borrower gauge when they will be ready to transition from renter to homeowner. Some renters establish a separate savings account for the down payment to lower the temptation to spend it. Make the monthly contributions automatic.
Potential buyers should shop around to reduce major monthly expenses on current expenses such as car insurance, renter’s insurance, health insurance, cable, internet or cell phone plans. Not that only renters should do this, but there may be deals or promotions available that allow anyone to save hundreds of dollars by adjusting contracts. On the flip side, monitor spending. With online banking, keeping an eye on spending is easier than ever, and seeing where most of one’s income is going is very enlightening.
Lastly, loan officers can help potential borrowers look into state and local home-buying programs. Many states, counties and local governments operate programs for first-time homebuyers. Some programs offer housing discounts, while others provide down payment loans or grants.
There are plenty of benefits to home ownership, and buying one is an event to be celebrated – but laying the groundwork is critical! And originators are in an ideal place to help borrowers on their way
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