Hi friends, thanks for downloading the Money Girl Podcast.

I'm Laura Adams, your host, and the author of the award-winning and fun guide to personal

finance called Moneygirls Smart Moves to Grow Rich.

Get your copy of the paperback or e-book from your favorite bookseller.

A money girl reader named Monica asks,

I want to buy a house in a few years.

What's the best way to start saving for the down payment and what type of account should I use?

Most people would love to own a home or vacation property of their own, but they don't have enough for a hefty down payment.

In this two-part series, I'll tell you how much money you need for a down payment, where

to put it, and how to save as quickly as possible to buy the home of your dreams.

When you get a mortgage to buy a home,

lenders require that you make an upfront investment, which is called a down

payment. A typical down payment ranges from 5% to 20% of the purchase price. For instance, let's say you find a great place and negotiate with the seller to buy their home for $300,000.

If a lender approves you for a loan with 10% down, you'd have to pay $30,000 plus additional

closing costs out of pocket and borrow the balance of 270,000.

So the amount of down payment money you need to save depends on two factors.

The purchase price of the home you buy and the percentage required by the lender to pay up front.

The larger your down payment, the smaller your mortgage and monthly payments will be.

A huge benefit of paying at least 20% down is that you

don't have to pay private mortgage insurance or PMI. This is an additional

monthly expense you must pay, which protects the lender in case you default or don't make payments as agreed.

However, you can cancel PMI if you pay down your mortgage so you have at least 20% equity in your home.

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