Philip Ottaviani's Blog
You're on the right track if you've started saving for your mortgage down payment. It could take you several years to save the size of down payment that shaves $200 or more a month off your monthly mortgage premiums. Between now and the time that you save a good down payment, a lot could happen.
Just what does go into those early mortgage payments?
Economic shifts could find you moving to another job. Other changes that just might happen before you finish saving your down payment range from meeting your future spouse, having another child or needing to move an aging parent in so that you can take care of her.
But, you could be fortunate and not have to deal with a lot of personal or work related life shifts. You still might have to adjust after you understand the different costs that go into early mortgage payments. For instance, after you find the house that you want to take a loan out for, you will generally have to pay:
- Closing costs (this expense generally runs between two to five percent of the cost of your house)
- Points (the more points you pay, the lower your monthly mortgage premiums generally are)
- Title search and title application fees
- Home appraisal fees
- Home inspection fees
- Mortgage application fees
- Realtor commissions and fees
- Loan origination fee
- Credit report fee
- Down payment
- Mortgage insurance premiums
Seek help that has nothing to do with a mortgage lender
Depending on where you buy your house, you might also have to pay the first month's homeowner's association fee. A healthy mortgage down payment can keep you from having to pay mortgage insurance. Check with your realtor and the lender that you go with when you buy your house. If you can't avoid paying for mortgage insurance, at least work to get the lowest insurance possible.
After all, you have shown the lender that you're a responsible borrower. You did that when you took the time, perhaps years, to save for a strong mortgage down payment.
Regarding a healthy mortgage down payment, target saving 20% of the total cost of the house you're looking to buy for your down payment. This 20% is in addition to other costs, such as those listed above, that you will put toward owning a house.
If you want to add a financial cushion to the home ownership process, consider saving the first two to three months of your mortgage. Keep this money in the bank in the event that you experience a life shift that ties up a portion of your income for a few weeks.
Make the saving process easy on yourself by holding all adults who live in your house responsible for contributing a portion of their income to the mortgage down payment and the monthly mortgage premiums. Owning, maintaining and paying for a house is not the time to be a hero. The more people you have helping you to pay and care for the house, the better.