How To Save for Your First Home
February 24, 2025
Owning a home is a significant milestone in anyone's life, and it often signifies financial stability. However, buying your first home can be daunting, especially when considering the financial commitment. Here’s what you must know about down payments, mortgages, and long-term costs as a first-time home buyer.
MortgagesA mortgage is a loan secured by property, usually real estate property. Lenders view these loans as less risky because the loan is backed by substantial collateral. The key components of a mortgage are the principal (the size of the loan), the interest on the loan, and the term length – how long the borrower (you) has to pay back in full.
When shopping for a mortgage, you should take into account the annual percentage rate (APR), which includes the interest rate and any points, broker fees, and other charges that you pay to get the loan. Remember that lenders may offer lower rates for higher down payments.
Saving for Down PaymentA down payment is an upfront amount of money you pay towards buying your home. This amount is deducted from the total cost of your house. The typical rule of thumb is to save 20% of a home’s purchase price as a down payment.
For many first-time buyers, saving this much can be challenging. However, a larger down payment can lead to better mortgage rates, more equity in your home from day one, and lower monthly payments.
There are numerous programs available that can help first-time buyers afford a larger down payment faster. For example, Federal Housing Administration (FHA) loans typically require just 3.5% as a down payment, while other state and local housing programs may provide assistance or allow for lower down payments.
Long-term CostsWhile mortgages and down payments are major parts of buying your first home, it’s crucial not to forget the ongoing, long-term expenses. This includes homeowners insurance, property taxes, utilities, and regular maintenance.
Additionally, unexpected costs will inevitably arise, from minor repairs to major replacements. It's a good idea to set aside an emergency fund for these unpredictable expenses.
Plan for these three core elements — mortgages, down payments, and long-term costs — and you’re already on the right path toward successfully saving for your first home. It’s also critical that you take the time to evaluate your current financial situation. Start by creating a realistic budget that includes your income, living expenses, and any outstanding debt.
Find a First-Time Buyer AdviserBuying a house is likely one of the most significant financial decisions you’ll ever make. Doing your homework now can lead to greater financial stability as you settle into homeownership.
Working with a financial adviser or a real estate agent specializing in working with first-time home buyers can prove instrumental in guiding you through this process.
Thankfully for you, Ole South caters to first-time buyers. View our communities today!