Down Payments

If you’re thinking of buying a home, one of the main considerations is the mortgage. How much can you borrow and what will it cost? Great mortgage deals have become scarce. Lenders are much more cautious about how much they’re willing to lend.

The easiest way to get a low interest rate on your mortgage is to put down a significant down payment. 20-30% of the purchase price is considered to be good. This will make you less of a risk to the lenders, who’ll be tripping over themselves to loan you money, even in a tough economy.

If you’re trying to save up for a down payment, here are five tips that can help you get closer to your goal:

1. Make a plan. It helps to know your target.

2. Open a separate savings account with the best interest rate you can find.

3. Set up automatic monthly contributions so you don’t forget to save.

4. Get a second job. This may sound extreme, but it can make a huge difference. Working two nights a week in a restaurant or behind the bar can be surprisingly profitable. It need only be for a few months.

5. Eliminate unnecessary expenses. You can live without cable TV and a gym membership. Eating in is much cheaper than going out. Instead of going to the cinema, rent a DVD.

Another way to get a good rate on a mortgage is to raise your credit score. Pay off those small, annoying debts. While you’re saving for your down payment, don’t forget to continue making repayments on credit cards, loans, etc. Missed payments are expensive and will ruin your credit score. Don’t apply for new credit just before you apply for the mortgage. Too many credit applications over a short period of time will negatively affect your score. It may not seem like a big deal, but if you’re taking out a 30-year mortgage, that extra half of a percent will make a world of difference.