You’ve been told that it’s a great idea to save at least 20% of the purchase price of a home to avoid private mortgage insurance. That information is a solid fact.
It’s also unusual for first-time homebuyers to have that amount of money in their savings accounts. If you buy a $250,000 home, a 20% mortgage down payment would be $50,000. You’d want another 5% to cover moving fees and closing costs.
That’s why many buyers use a partial down payment percentage. If you have an excellent credit score, it is possible to buy with only 3.5% of the purchasing price.
In return, you’d need to pay PMI with your monthly bills.
How Much Should I Have in Savings?
The general rule for homeowners is to have at least three to six months of their total expenses available in savings. You also have the option to save more than that if you want to ensure you’re keeping your home.
If you think it might take longer to find a job if you become unemployed or your income is irregular, some homeowners benefit from having a year’s worth of expenses saved.
Everyone has a different opinion about how much cash you should keep in a bank account. How you save is less important than the goals you set for yourself.
If you’re not aggressively saving for the future, you could be setting yourself up for hard times. Up to 20% of your income should go to an IRA, a 401(k), or a similar option. Anyone without an emergency fund should put that amount there first.