How Much Money Do I Need To Buy A House?

It is a common misconception that you need to put 20% down on a house when you buy. There are loan programs that require as little as 0% down, actually!

There will be a future blog about different loan types and how much each requires to be put down, but for now you can contact your favorite lender (or me and I will get you connected with one of my favorites) to see what works best for you! Just know, you may not need as much as you think!

When it comes to buying a house, it is important to remember that your down payment is not your only cost. Many people save their 5%, or whatever amount they chose and think they are good to go. I have actually seen many Tik Tok videos recently of people “teaching” their audience that “if you and your partner each save $100/week for a year you will have $10,400 and you can buy a $300,000 house with 3% down”. This is not true for many reasons.

1. Just because you have the down payment, does not mean your debt-to-income will allow you to be approved for a $300,000 mortgage. 
2. Although you may be able to put just 3% down, you will still have closing costs.

So what are your closing costs?

Closing costs consist of all of the fees from the lender, title company, taxes, insurance, etc. Lending fees typically include underwriting fees, fraud review, appraisal, credit reports, prepaid interest, any points, and more. Title fees typically include your title insurance policy, settlement fees, and recording fees. Taxes are often prorated based on a calendar year, so depending on when you purchase the home and how much, if any, of the property taxes the seller has paid for the year, you may owe taxes or you may receive a credit for them. Homeowners insurance premiums are also paid at closing. 

Fees for your real estate agent should also be considered. Due to a recent settlement with the National Association of REALTORS®, any commission being offered by the seller to pay the buyer’s agent cannot be advertised on most websites. The buyer is always responsible for their agent’s commission and a buyer agency contract with the agreed upon fee must be signed prior to showings. However, the way the buyer’s agent is paid is negotiable within the purchase agreement or on a separate form. As a buyer, you can negotiate the seller paying your agent’s commission, just keep in mind that if the seller does not agree to pay and you move forward with purchasing the home, you will be responsible for paying it.

How much does all of this cost?

I tell my buyers to plan for 3-5% of the purchase price for closing costs. This is on top of your down payment and agent fees. To be as prepared as possible, have at least 5% of the purchase price saved for these expenses. It is better to have planned and prepared for a higher amount than receive your settlement statement right before closing and realize you don’t have enough saved. 

Keep in mind that the inspection will need to be paid at the time of the service. This will typically cost between $300-500, but can vary based on location and any additional inspections beyond the standard home inspection. 

As always, a lender is your best source for all things mortgage related, but I am more than happy to field any questions you may have or refer you to someone who can answer them better! You can contact me using the information on the home page or the “Contact Me” button under the “About Me” tab. Happy buying!!