WalletPrep

PrintBack to the lesson

WalletPrep worksheet · Housing

How to save for a down payment on a house

Name ____________________ Date __________

Key ideas

  1. Your target is down payment plus closing costs. The CFPB suggests budgeting 2% to 5% of the price for closing costs on top of the down payment.
  2. Keep the money safe, not invested. Money you need within a few years belongs in insured savings, CDs or Treasury bills, where a market drop can't shrink it.
  3. Under 20% down costs more, not nothing. Smaller down payments usually add mortgage insurance or a higher rate. Compare the total cost before you choose.

Vocabulary

Down payment
The cash you pay toward a home's price yourself at closing. A mortgage covers the rest.
Closing costs
The fees and prepaid bills you pay to get a mortgage and transfer a home, on top of the down payment.
Emergency fund
Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.
Stock
A small piece of ownership in a company. Its price rises and falls with how investors value the business.
Private mortgage insurance
Insurance a lender usually requires on a conventional mortgage with less than 20% down. You pay for it, but it protects the lender if you stop paying.
FHA loan
A mortgage insured by the Federal Housing Administration that allows a down payment as low as 3.5%.

Work it out

Taylor plans to buy a $300,000 home with 10% down and has $6,000 saved, separate from her emergency fund. She can save $800 a month at an assumed 4% a year.

  1. Down payment, 10%
  2. Closing costs, 3%
  3. Cash to close
  4. Already saved
  5. Still to save
  6. Saved each month
  7. Time to goal at 4%

Check yourself

  1. A $250,000 home, 10% down and closing costs of 3%. What is the cash to close?

    • A. $25,000
    • B. $32,500
    • C. $7,500
    • D. $50,000

  2. You plan to buy in 2 years. Where should the down payment money go?

    • A. A stock index fund
    • B. Cryptocurrency
    • C. An insured high-yield savings account

  3. What is the lowest down payment an FHA loan allows?

    • A. 3.5%
    • B. 0%
    • C. 10%
    • D. 20%

Your turn

Open a separate savings account named for the house. Work out your cash to close with the example as a template, then set an automatic transfer for the day after your next payday.

www.walletprep.com/learn/save-for-a-down-payment/ · Free to print, copy and share for non-commercial classroom use.

Answer key

How to save for a down payment on a house

Work it out

  1. Down payment, 10%$30,000
  2. Closing costs, 3%$9,000
  3. Cash to close= $39,000
  4. Already saved− $6,000
  5. Still to save= $33,000
  6. Saved each month$800
  7. Time to goal at 4%3 yr 2 mo
  1. Down payment: $300,000 × 10% = $30,000. Closing costs at 3%: $300,000 × 3% = $9,000. Together, $39,000.
  2. Minus the $6,000 she has, Taylor needs $33,000 more.
  3. Saving $800 a month at an assumed 4% a year, she reaches $39,000 in 38 months. With no interest it would take 42 months.

Check yourself

  1. B. $32,500 $250,000 × 10% = $25,000 down. $250,000 × 3% = $7,500 closing costs. $25,000 + $7,500 = $32,500.
  2. C. An insured high-yield savings account Money you need within a few years should be safe from market drops. An insured savings account keeps the full amount available.
  3. A. 3.5% FHA loans allow down payments as low as 3.5% of the price. VA and USDA loans offer zero down for eligible borrowers.