Many Americans dream of owning a home. For many, it takes several years and a lot of planning and saving to make this dream come true. Here are a few tips to help you save smarter, and to get you into your new home faster.

Save for your down payment

Putting money down on a home has several advantages: you may be able to secure a lower loan rate, enjoy smaller monthly payments and, in some cases, avoid paying private mortgage insurance. Accumulating a substantial sum – say, 15% or more of the purchase price – will take time and discipline. Here are some suggestions to make saving this amount easier.

Formulate a Plan

Once you decide how much you want to save and how quickly you want to save it, break it down into manageable goals. For example, if you want to save $15,000 over three years, you will need to save $400 a month in an account earning 3% interest.

Make it Automatic

To ensure you’re regularly saving for your home down payment, request that a portion of your paycheck be automatically transferred to your savings account.

Spend Less

There are several creative ways to spend less money. Here are a few that may not be on your radar: Buy fewer clothes, eat out less often, cancel your cable service and seek out free sources of entertainment. The more creative you get, the more you’re able to save, and the larger your down payment savings will grow.

Save More

What about depositing any bonuses you receive into your down payment account? How about directly depositing your income tax refund into your savings account? When you pay off a loan, continue to make the payments to your savings.                                

Don’t Pay for Private Mortgage Insurance (PMI)

Saving 20% of your home down payment will allow you to avoid purchasing private mortgage insurance (PMI). This type of insurance usually costs between .5% to 1% of your entire loan amount. For example, let’s say your home loan totals $300,000, you could pay as much as $3000, or $300.00 a month, assuming a 1% PMI fee.

Homebuyer Resources

Once you’ve reached your savings goal for your down payment and you’re ready to purchase your first home, you’ll want to check out these valuable resources:

• Review the low loan rates and special features of the CalSTRS Home Loan Program.
• Check out the competitive rates and terms available at Provident Credit Union's Mortgage Loan Center.
• The California Housing Finance Agency offers the Extra Credit Teacher Program, designed to help eligible teachers, administrators, staff members and classified employees who serve in high priority schools around the state purchase their first homes. The program offers low-interest-rate financing and down payment assistance. To learn more, visit www.calhfa.ca.gov or call (877) 9.CalHFA (877-922-5432).
• There are other programs, such as housing assistance for teachers in the San Francisco Unified School District. Check with your district to see if there are special programs available locally.

Remember, at the end of the day, the more money you can put down on your new home, the more you’ll avoid paying higher and longer-term interest payments and mortgage insurance.