Thinking of buying a home this year? Let’s talk about how much money you REALLY need to buy a home!
It’s a huge myth that you MUST put 20 percent down. Today, approximately 68 percent of buyers put down less than 20 percent; 40 percent of buyers put down less than 10 percent, and many put down as little as 3.5 percent. The average first-time homebuyer puts down 7 percent. Your lender can show you what your payments will look like if you put down 3.5 vs. 7 vs. 10 percent, etc.
For example, if you’re buying a home worth $200,000 then your minimum down payment, at 3.5 percent, would be $7,000. Your down payment can come from many places—personal savings, 401k/IRA funds, a gift from a family member, or with tax season right around the corner consider using your income tax refund!
Much of your down payment requirement depends on the type of loan you’re getting. There are many options available, even to first-time home buyers. It’s important to work with an experienced lender so they can help advise you what your options are and which makes the most sense for your particular needs.
You may have also heard of closing costs. Closing costs are usually between two to five percent of the sales price, and include things such as loan origination fees, appraisals, title company fees & prorated taxes/insurance, etc. Sometimes they can be rolled into the purchase price, or a seller may offer to pay them, which will minimize your out-of-pocket expenses. I always recommend that my clients save more than their down payment amount so that we’re prepared for all scenarios.
Before purchasing I’d also recommend having a minimum of 2 – 4 months worth of savings put away. This will help cover re-keying the locks, putting up window treatments, and give you a cushion for other little things that come up.
Want to learn more? Need recommendation for a local lender? Let’s chat!
Leanne Brittain is the Managing Broker of Nest Realty Morganton. Having made more than 15 moves gives her unique insight into the buying and selling processes, including relocation. To learn more about Leanne, visit her agent page.