Many homebuyers know they need to save to purchase a home but how much and where is all that hard earned money going?
Down Payment
Most people are aware that they need to make a down payment when they buy a home. Unless you are eligible for a USDA loan in a rural market or a Veteran eligible for a VA insured loan, you will need to make a down payment. Down payment requirements will range based on the type of loan.
First Time Home Buyers can qualify for Conforming loans with as little as 3% of the sales price as a down payment. Conforming loans for non-first time buyers will require at least 5% down payment. Borrowers wishing to avoid Private Mortgage Insurance will need a 20% down payment.
Closing Costs
The amount of the closing costs will vary based on the purchase price, loan amount and the state in which the property is located. Closing costs are generally broken out between lender fees, third party fees, recording fees and transfer taxes.
Our article on Navigating Common Mortgage Fees provides a detail of all the different types of closing fees you can expect.
The main thing to shop for is the lender fees. Be sure to check out our article on How to Shop Different Lenders to learn the best practices when comparing multiple offers from mortgage companies.
Pre-Paid Items and Escrows
At closing you will also need to pay upfront items related to insurance and taxes as well as establishing your escrow account for taxes and insurance. If your property belongs to a Home Owners Association (HOA), there may be additional upfront HOA dues required to be paid at closing.
Moving Costs
Depending on your situation, moving can be a breeze or a real expensive pain! Don’t forget to check with moving companies if that is a something you will require.
Updates & Furnishings
Keeping some cash in your pocket is always a good move, especially when buying a new home. There may be cosmetic things you want to do to the home or you may need to buy new furniture. Saving some cash for these options is a better move than using credit cards to finance your renovations or furnishings.
Start Your Mortgage Calculations with Local Mortgage
If you are looking to purchase a new home and would like to discuss your particular situation, feel free to contact a Local Mortgage Loan Officer. Our team of experts is here to help you through the process and help you determine all of the upfront costs related to your new home.