Mortgage Rate News

Image by Robert S. Donovan via Flickr

One of the outgrowths of the economic crisis and credit market crash has been a trend by mortgage lenders to require a little more of would-be borrowers. To this end, it is really no surprise that larger down payments are being asked of borrowers. Even those with reasonably good credit are being required to provide a down payment. 0% down mortgages are now few and far between. Even the increasingly popular FHA loan requires a 3.5% down payment. As a result, before you even begin shopping around for a home mortgage loan, it is a good idea to consider saving up for a down payment.

Saving up for a down payment

My parents bought their first home after spending a couple of years saving up for a down payment. Back then (much as it is becoming again now), buying a home required advance planning. We are lucky now, in a way my parents weren’t though. Back then, my parents didn’t have access to high yield savings accounts. When you are saving up money for a down payment, you can increase the rate at which your money grows with a high yield savings account. Put your money to work for you.

Frugal Dad offers a list of his favorite places to put emergency fund money. I think that these places also offer good repositories for your home mortgage down payment money:

1. ING
2. EverBank
3. WT Direct
4. Ally Bank 

Right now, many mortgage lenders require 5% to 10% down if you are not getting the FHA loan. And, of course, the old-school personal finance gurus are once again extolling the virtues of a 20% down payment (which can help you avoid PMI). No matter how much you want to put down, it is a good idea to save up for a down payment. You want to be able to reduce the amount you borrow, and you can get better terms with a larger down payment. This can help you save money over the life of your home mortgage loan.