Saving For A Down Payment Versus Retirement

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Cervone Deegan + Associates knows that saving up for a down payment on your new home can feel like an impossible hurdle for many. After you pay taxes, put funds aside for retirement and cover basic living expenses it can feel like you don’t have much left to build a reserve for a new home. This may have you looking to cut costs here and there and maybe even consider lowering your contribution towards your retirement. Here is a breakdown on whether that is the right move for you.
Retirement Planning Logistics
There are some factors that you will want to give thought to if you debate lowering your regular retirement contributions. First, you will want to factor in your age, where you are in life and your tax bracket. Depending on how much time you have left until retirement and how much you have saved, it may be better to alter your lifestyle and spending instead. Next you should also think about if you have an employer match situation. If your employer is matching your contribution, you may only want to scale back to the max of where your employer is matching as it is basically free money. Finally, definitely consider any negative effects if you lower your contribution enough where it pushes your income into the next tax bracket. That scenario would not be a great option for you in the end.
Other Financial Considerations
When you look at your options with how to achieve your down payment goal, you may want to figure out how much house you can comfortably afford. It is one thing to lower your contributions for the down payment, but if you are planning on purchasing a more expensive home, then your monthly housing costs could bar you from resuming with your higher contributions. Take a good look at the financials with a mortgage calculator and be sure to factor in taxes, insurance, any HOA’s or PMI costs too.
Finally, the last and big question is how much do you need for the down payment? The figure of 20% is commonly what everyone thinks is necessary as you can avoid PMI. However, the reality is that there are different loans and programs that exist where even as little as 3% are possible. Looking into your home loan options will help dictate what is best for you and ultimately how much you will need to start saving. 

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