STATE-BY-STATE BREAKDOWN OF HOME DOWN PAYMENT PRICES IN
LATEST CONSUMER REPORT

Jaime Catmull, Director of Public Relations

EL SEGUNDO, CA, March 7, 2013 - In this "Save Up Series" installment, which focuses on saving for a home down payment, leading personal finance site GoBankingRates.com breaks down the differences in average home prices across the country and explains the benefits of saving up for a full 20 percent down payment. The report also provides tips for consumers on how to reach that 20 percent savings goal.

Recognizing that the size of a home down payment is highly dependent on where a person lives, GoBankingRates managing editor, Casey Bond, states, "A 20 percent down payment on a single family home in Toledo, Ohio is certainly going to be a much different number than a 20 percent down payment on a condo in New York City."

When it comes to saving for a home down payment Bond acknowledges, "It can be tempting to cut corners, especially when it feels like there are so many factors working against you like when necessities like food, gas, and healthcare just keep getting more expensive."

Even so, she recommends having patience and following a well thought out savings strategy to reach 20 percent down. "That's the smartest, most cost effective thing you can do on your way to becoming a homeowner," Bond adds.

How Much of a Down Payment Do I Need?

If you plan on applying for a mortgage to finance a home purchase you will have to make a down payment, a portion of the total home cost up front. There’s no way around that. However, how much you choose to save for a home down payment will make a big difference in the long term cost of financing.

In fact, while it is possible to finance a home with less than 20 percent down, it's always recommended you save for at least a 20 percent down payment for a number of reasons:

Less risk: Remember the mortgage bubble that burst in 2007? We got into that mess largely because home owners financed much more home than they could realistically afford. A loan-to-value ratio of 80 percent or less is considered to be safer allowing you to ride out economic downturns and prevent your mortgage from becoming underwater.

No PMI: Due to the increased risk associated with a smaller down payment, most lenders will charge private mortgage insurance (PMI) until you achieve 20 percent equity in your home, often a real challenge given today's housing market. PMI is notoriously expensive and tough to cancel. You're better off avoiding the fee completely by saving for a proper down payment.

Smaller Payments: In addition to PMI, lenders will typically charge a higher interest rate on loans with less than 20 percent down to offset that risk further. However, saving a full 20 percent to put down on a home will not only keep your interest rate low, contributing more money also cuts down the total principal financed translating to smaller monthly payments.

Saving for a Home According to Where You Live

Of course, a 20 percent down payment on a single family home in Toledo, Ohio is certainly going to be a much different number than a 20 percent down payment on a condo in New York City.

To help you better plan for how to save money to buy a house here is the median list price for homes in each state according to Zillow.com, as well as how much you would have to save to put down 20 percent for a mortgage:

It can be tempting to cut corners while saving for a home, especially when it feels like there are so many factors working against you. However, having patience and following a well thought out savings strategy to reach 20 percent down is the smartest, most cost effective thing you can do on your way to becoming a home owner. Remember, the sooner you start saving, the easier it will be to reach your goal. So, create a plan today and stick to it.

© 2013 TLC Magazine Online, Inc.