You've decided that at some point in the future, you want to own your own home, but you're not yet ready to do so. Saving for a down payment on a house is no simple thing but it is certainly possible, especially if you have a plan. While saving for a down payment cannot be accomplished overnight, it can be done in less time than you may think; and the sooner you begin saving, the sooner you'll be able to reach your savings goal with less strain on your budget.
Down payment requirements vary, depending on loan types; for example, FHA requires a minimum 3.5% while conventional financing requires 5% or more. That often translates into at least a ten thousand dollar savings that is needed in order to make a good down payment on a house. While saving that kind of money may seem unrealistic, especially when the interest rates offered by banks are as low as they currently are, contributing regularly to a savings account, as well as sacrificing in order to put as much money away as possible, will definitely have been worth the effort when your interest rate is lower and you will not be required to pay mortgage insurance.
Emergencies will happen, but you should plan for such emergencies with a separate account rather than the account that is reserved for your down payment.
Typically, when people think about saving for a down payment, they understand that every penny counts, but we normally will head to our local bank to open a savings account. Today, that can be a short sighted option, with so many other possibilities open to us. Using a higher yield savings account can help you add to your savings even faster by taking advantage of higher rates offered at some banks. In addition, these accounts provide a great way to protect your down payment funds because of their backing by the Federal Deposit Insurance Corporation (FDIC).
Many of us are familiar with online bank accounts, as most of our regular banks offer them these days. Not many people, however, are familiar with those banks that offer higher yield savings accounts online that are not directly tied to brick and mortar locations. Some savings accounts are entirely online, and, therefore, do not incur the costs that a local bank may charge to maintain a savings account. Also, having a higher yield savings account that is maintained online allows you to easily track your savings and watch it grow; and the psychological impact of seeing your down payment account continue to grow can be a great incentive to contribute even more to the account.
Other advantages of online higher yield savings accounts are that most of these accounts do not have minimum balance requirements and they also do not have minimum deposit requirements (which your local bank may in fact have). Be sure to check for FDIC insurance on your deposits and conform to all requirements before you select a higher yield savings account in which to put your down payment funds.
An online search for "High Yield Savings Account" will identify many sources for such savings accounts. Be sure to thoroughly research all that you consider using.
As you save additional funds, continue to check out alternate accounts to be sure that you're always getting the highest possible interest on your deposits, which will help grow your down payment account even faster. Stay the course -- you will eventually get to where you want to be.
A closing tip: Consider having a certain amount transferred automatically each month from your checking account to your higher yield down payment savings account. This is forced savings and something that can help your account grow even more quickly and painlessly.