Save to Buy a House. Buying a house is one of the biggest investments you will make in your life. People save for years and still find themselves in an unfavorable situation because the market prices keep fluctuating.
The good news is that now is the perfect time to buy a house! The mortgage rates are low, as well as the inventory. You might have trouble searching for a house, but you won’t have any problems negotiating with the seller.
With that said, let’s talk about how much you will need to buy a house.
Here’s an example to help you understand your out-of-pocket costs:
Let’s say you are buying a house that costs $300,000. Here’s how much it will cost you out of pocket:
| Private Mortgage | Conventional
Mortgage |
VA and USDA
Mortgages |
FHA
Mortgage |
|
| Down Payment | 20% or $60,000 | 3% or $9,000 | 0% or $0 | 3.5% or $10,500 |
| Closing Costs | 3% or 9,000 | 1.5% or $4,500 | $4,500 or 1.5% | 1.5% or $4,500 |
| Total Cost | $69,000 | $13,500 | $4,500 | $14,500 |
Down Payment
The higher your down payment, the smaller the loan you will have to apply for. The average down payment is 12%. Most active duty members have the benefit of paying just 4%. Lastly, first-time homebuyers choose to make a 7% down payment.
There’s no hard and fast rule for the amount of money you need to pay as a down payment. However, a higher amount means your monthly mortgage payments will be low.
Prepaid Costs
Most first-time homebuyers forget to include prepaid costs in the total cost, usually because they don’t know about it. Prepaid costs do not include closing costs. These are advance payments for expenses involved in owning a home, such as a mortgage insurance payments, real estate tax payments, and insurance payments.
Prepaid costs include per diem interest, which is paid on the mortgage. It is based on the closing date. It is the interest that your mortgage accrues from the closing date till the deal is finalized.
Earnest Money
Last but not least is the earnest money, a deposit the buyer makes in good faith. It ensures the seller that they are dealing with a serious buyer who intends to complete the deal.
Closing Cost
This amount is the third-party fee you must pay when buying a house. The municipality, your lender, and the title company set it. It can vary depending on the loan size and is between 1% and 6%.
So now you know how much you have to save before buying a house. This tentative figure is subject to change based on how you maintain your house. This is why it is necessary to get a house inspection to ensure the house has no major repairs that might fall on you. If your heart is set on the house despite the repairs, negotiate with the buyer to include them in the asking price.
Buying a house is a lengthy and complex process. For this reason, working with an Orlando realtor to find your dream house is better. Visit the Megan Dowdy Realty website to browse quality and luxurious listings, or talk to a Winter Garden Realtor regarding your wants. For more information, call 407-509-9279.
