Saving for the Sweet Spot

When preparing to buy a home, it can be difficult to determine exactly how much to save towards a down payment. It is important to strike a balance between being well-prepared and waiting too long. It’s true – there’s no such thing as having too much saved when buying a home. The more a buyer has saved, the more options are available in terms of mortgage products, budget, and thus the range of homes a buyer can afford to purchase.  

However, if a person spends years and years saving beyond what might have been necessary, the buyer also runs the risk of missing out on a particular home that interested them or on a favorable interest rate if the market shifts. For this reason, it’s important to save towards a sweet spot.  

What’s the sweet spot? 

Consider your desired monthly payment, the current interest rates, and the down payment to find your sweet spot. Your desired monthly payment will help you determine the overall budget for this purchase. From there a down payment plus closing costs can be estimated at roughly 10% of the total home price. Both the down payment and the incidental costs at closing are due at the time of closing.  

Once you’re comfortable with the budget you’ve set for your home, your goal now is to save towards this sweet spot of 10%. This will also guide your timeline of when to begin shopping for a home as you will need that money saved beforehand.  

But what if I qualify for 0% Down? 

In the case of homebuyers who qualify for products with no down payment required, please note that closing costs are separate fees. We estimate closing costs to be anywhere from 3% to 6% of a total home price. With no down payment, it may be wise to save towards 6% to be certain you have all the funds you need at closing.  

For more resources, visit the Evolve Homebuyer Resource Center