Should you spend everything on a home down payment?

1. Job security

It is said that you should ensure you have at least 3-6 months worth of fixed expenses in savings. In the event that you lose your job, these savings should help you cover your expenses while securing a new job. There for, it is not suggested that you use up your emergency savings to fund your down payment.

2. Are you able to save up a 20% down payment?

If you make a down payment of less than 20% of the purchase price, you will require mortgage default loan insurance. The minimum down payment is 5%. The cost of mortgage loan insurance can be expensive, thus the more down you put, the lower the premium is. If you have the funds and are able to get over the "premium humps" to hit 10%, 15% or even 20% down payment, it may be worth putting some extra money down.

3. Will you be house poor?

Properly budgeting for your new home and lifestyle is something new homebuyers fail to properly plan. Review your average spending over the last three months to get a good indication of how much it costs to live your life each month. Factor in your new mortgage payment and the estimated costs of owning a new home such as property tax, home insurance, new transportation costs and repair/maintenance funds. These are some costs that you may not have had to budget for while renting or living with family.

4. Can you still save for retirement in your new home?

One of the most important goals is to put away money for your retirement. Buying a home can be a great investment in building equity throughout your lifetime, but it shouldn't be your only method of saving for retirement. It is suggest to put anywhere from 10-20% of your gross income per month away to save for retirement. Ensure that you are able to fit this monthly savings into your home budget.

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