Saving for a Down Payment on a House

Saving for a Down Payment on a House

Helpful Tips to Minimize the First Time Home Owner Loan

Feb 5, 2010 Brenna Coleman

First time home loans can be overwhelming for new home owners. The larger the down payment on a house however, the smaller the financial burden.

Buying a first home is an exciting time in an individual's life. It is a right of passage, a transition to independence from either renting or living with family. A sense of liberty comes with buying a new home; but, unfortunately, a great responsibility comes as well — the first time home owner loan.

As financially, and even emotionally disturbing as first time home loans can be, buyers do have a way to diminish the oncoming wave of debt from constantly accruing interest, private mortgage insurance, and principal loan payments. By saving for a sizable home down payment, new home owners can be in a financially stable position when it is time to take the keys to the first house

Why Save for a Large Home Down Payment

The main reason to save for a large home down payment is money. In the long run, a twenty percent down payment on a house will reduce the overall cost by thousands, if not tens of thousands of dollars. The more money to begin with, the smaller the first time home owner loan will be. The less debt there will be to pay interest on, the smaller the overall cost of interest. The less risky the loan, the lower the interest rate will be, again diminishing money spent on interest.

Another benefit of taking the time and effort to save, is not having to deal with private mortgage insurance. With a home down payment of at least twenty percent of the price of the house, new home owners can avoid paying for mortgage insurance altogether. As insurance generally costs between one half and one percent of the loan, eliminating this cost can bring the total potential price of a home down by several thousand dollars.

Buying a home with no money down, or with only a small amount of initial cash may seem appealing. In some cases of course, it may be beneficial. For example when house prices are down, and expected to rise, or when rent payments are so high it is impossible to save money. For many however, having the patience and diligence to build up a large down payment for a house, is ultimately the most cost-efficient option.

Read more at Suite101: Saving for a Down Payment on a House: Helpful Tips to Minimize the First Time Home Owner Loan http://first-time-home-buyers.suite101.com/article.cfm/saving-for-a-down-payment-on-a-house#ixzz0egjATOk8