Solve the down payment riddle

Buying a house is one of the biggest financial commitments of your life, and it usually starts with a down payment.Here are some ideas to get started:

• Figure out what you can afford. House payments and other debt shouldn’t exceed 40 percent of your income.
• Calculate how much you’ll need for your down payment – if you put down less than 20 percent, you’ll likely have to add private mortgage insurance to your monthly payments.
• Where will you keep the money you are saving? Because this is for a short period and a specific need, the stock market is the wrong place to park your funds. Look for savings accounts, certificates or annuities with maturities that match your time frame.
• Budget – you may need to cut expenses or make more money. One is usually easier than the other. Look at your expenses and trim anything you can. Do you go out to eat often? Do you pay for a phone you don’t use?
• Open a separate bank account (or subaccount like we offer at Everence Federal Credit Union) to automatically move funds from your primary account on a regular basis.
• Did you get a raise? Add any additional take-home pay to your down payment savings account.
• If you get an income tax refund, immediately move it to your separate “house” account.

Buying a house can be a long process. While working toward building your down payment, you should also check out the local market. National and local real estate websites can help you find what’s for sale in various price ranges.

Start saving, and happy house hunting.

Brian Rhodes is a Financial Advisor in the Everence office in Harrisonburg, Virginia.