Saving To Buy a House?

Understanding the costs or expenses you’ll be confronted with is critical when putting together a savings plan to purchase a house. Here are a few of those expenses:

The Down Payment – This is probably the one everyone thinks of first, and for good reason. We’ve been conditioned over the years to think that a 20% down payment is needed. According to The Mortgage Reports1, the truth is that the median home buyer puts down 14%, and that drops to 8% for buyers less than 32 years old. With some mortgage programs allowing as little as 3% and even zero down, you may be closer to home ownership that you think! 🏡😃

Closing Costs – As a home buyer, you will also need to budget for closing costs. Closing costs are fees associated with a home purchase that are paid by the buyer and/or the seller. These fees cover services and ensure a smooth transaction. Some fees are related to the property itself, while others are required to close and fund your loan. The fees are paid to your lender, and others to third parties such as appraisal, inspection, and title companies. The fees vary depending on the location, the size of the loan, and individual lender practices. Buyer closing costs are usually between 2% to 5% of the home’s purchase price. 

Earnest Money Deposit – Earnest money is a deposit made by the buyer to the seller that represents the buyer’s good faith to make a purchase such as the acquisition of a new home. The money gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. In many ways, earnest money can be considered a deposit on a home, an escrow deposit, or good faith money. The amount of earnest money varies depending on the market and the seller’s terms. While the buyer and seller can negotiate the earnest money deposit, it often ranges between 1% and 2% of the home’s purchase price, depending on the market. In hot housing markets, the earnest money deposit might range between 5% and 10% of a property’s sale price. Once deposited, the funds are typically held in an escrow account until closing, at which time the deposit is applied to the buyer’s down payment and closing costs. If the buyer breaks the terms of the contract, they may be at risk of losing their earnest money deposit. However, there are a number of potentially agreed-upon contingencies that may protect the buyer from backing out of a deal but still keeping all of their earnest money. 2 3 4

Being in-the-know on the different types of costs to expect is critical when saving to purchase a home. When you partner with me, you’ll have access to me and the mortgage lenders I work with, to get answers your questions!

  1. How Much Should You Put Down On A House? Not 20% (themortgagereports.com) ↩︎
  2. Earnest Money: What It Is and How Much It Is in Real Estate (investopedia.com) ↩︎
  3. Earnest Money (redfin.com) ↩︎
  4. Earnest Money Explained: What Is Earnest Money? | Zillow ↩︎

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