Mortgage 101: Saving for a Down Payment

Ready to fly the coop? The irony of home ownership is that you need a nest egg before you can actually buy a nest.

Kallee Feuz Mar 20, 2018

Article originally published March 20, 2018 and refreshed on March 18, 2021.

Coming up with thousands of dollars for a down payment on a mortgage may seem daunting, but it’s not impossible. Hopeful home buyers should start by getting their financial ducks in a row. Before you know it, you’ll be able to spread your wings and take flight on the journey to home ownership. Following are some ways to begin saving for a down payment to buy a house.

Zions Bank Mortgage Tip #1: Take a birds-eye view of your finances

Before you can save money, you need to know how you’re spending it. Take a look at the migratory patterns of your money. How much money do you bring in each month and where exactly does it go? A home budget calculator  can help you see the bigger picture. Once you have a handle on your financial situation, you can set realistic goals for saving for and buying a home. Use a home-buying calculator to estimate out how much house you can afford.

Zions Bank Mortgage Tip #2: Determine the size of nest egg you need for a down payment

Depending on the type of mortgage loan you choose, you will need to put down anywhere from 3 to 20 percent of the purchase price of the home (For a $250,000 house, that’s a down payment of between $7,500 and $50,000). Down payment funds can come from savings, gifts or government assistance programs. Remember, opting for a lower down payment could mean that you’ll pay more in the form of upfront fees and/or higher interest payments. And if you put down less than 20 percent, you’ll be required to buy Private Mortgage Insurance (PMI).

Zions Bank Mortgage Tip #3: Pluck the extras from your spending

A series of simple changes can add up to significant savings toward a down payment for your future home: Brown bag your lunch instead of eating out, cut the cable television, and ditch the rarely used gym membership. Watch your spending like a hawk and track expenses through personal finance apps or software. 

Zions Bank Mortgage Tip #4: Make saving as easy as duck soup

Take the thinking out of future saving decisions — set up direct deposit with your bank so a portion of your paycheck goes directly to your savings account. And decide ahead of time that should you receive a cash windfall — like a work bonus, tax refund or inheritance money — it will be socked away towards your home down payment savings goal. Additionally, you may be able to beef up savings by reducing monthly bills. Shop around for better rates on auto insurance, cable or satellite television, and credit cards; then switch to a lower-cost provider or renegotiate with your current carrier.

Zions Bank Mortgage Tip #5: Feather your nest with cash-back rewards

Capitalizing on credit card rewards (while staying out of credit card debt) is a simple way to boost savings and credit experience with little effort. Use a cash-back credit card like Zions Bank Agility Cash Visa® Credit Card* for everyday expenses and earn cash back on every purchase.

Zions Bank Mortgage Tip #6: Avoid birdbrained attempts for quick cash

Don’t be a dodo and drain your retirement account for a mortgage down payment. Besides losing a chunk of your retirement savings, you may have to pay hefty fees and early withdrawal penalties. However, if you’re a first-time homebuyer, you can withdraw up to $10,000 without penalty from a traditional IRA to help cover the costs of buying a home. Keep in mind, though, that you will have to pay income tax on the withdrawal.

Zions Bank Mortgage Tip #7: Ride the current of home loan assistance programs

Check out local and state down payment assistance programs in Utah and Idaho, which offer help with down payments and closing costs to various demographic groups, including first-time homebuyer or low- and moderate-income homebuyers.

Zions Bank Mortgage Tip #8: Don’t let setbacks ruffle your feathers

Market downturns, financial missteps and life’s circumstances may delay your home-buying dreams, but they shouldn’t derail them. Like the mythical Phoenix rising from the ashes, you can always renew your resolve and start again on the path of home ownership.

*Credit cards subject to credit approval. Terms, conditions and restrictions apply. See banker for details. 

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