How Much Cash Do I Need to Purchase a Home?
The answer to this question really depends on you and your situation, but I can tell you the three things that will cost money on closing day.
Down Payment
Every loan program is different. Everybody qualifies for different types of loan programs, but there is a rumor that you have to put down 20% of your loan amount. You don’t. You can even put down as little as zero if you qualify for that. In fact, in most cases you’re probably not going to be looking at a 20 percent down payment. But whatever your down payment is, you’ll owe the total on closing day.
Closing Costs
Whenever you buy a house, it seems like everybody’s got their hand in your back pocket. Everybody from title companies and real estate appraisers and lawyers to surveyors and pest inspectors wants their fee. Although the list is long, the good thing is that these fees can be negotiated.
A tactic I have found really helpful is to offer a little more for the home, and in return ask the seller to pay a certain amount of your closing costs. This works especially well when rates are as low as they have been for the last several years. It’s a very good trade off. For every thousand dollars that you borrow, it’s probably going increase your payments about $5 a month. In that scenario, would you rather have an extra $3,000 up front, or would you rather save $15 a month? I think most people would rather have the $3,000.
Prepaid Items
These are the expenses that most people forget about or never knew about. The main one is your first year of homeowner’s insurance to whatever carrier you choose. Your lender will establish an escrow account for you, and put a couple of months of property taxes and insurance payments into that account. You’ll also pay interest until the end of the month, the total amount of which depends on your loan size. So your prepaid items can add up, and you need to know what they’ll be ahead of time.
If you have any questions about the three things that will require a cash payment from you on closing day, give us a call. You can find us online or reach out and talk to myself or anybody on my team at 205–986–4220. We hope to hear from you soon.
— Ben Chenault,
Certified Mortgage Planner
NMLS# 130305
MortgageBanc / Fairway Nmls# 2289
Fairway Independent Mortgage Corporation is not a credit counseling agency and will not provide credit advice. Please consult a professional regarding your specific credit situation.
Copyright©2019 Fairway Independent Mortgage Corporation doing business as MortgageBanc. NMLS#2289.4750 S. Biltmore Lane, Madison, WI 53718, 1–866–912–4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender. Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, License No 41DBO-78367. Licensed by the Department of Business Oversight under the California Finance Lenders Law, NMLS #2289. Loans made or arranged pursuant to a California Residential Mortgage Lending Act License. Georgia Residential Mortgage Licensee #21158. Licensed Nevada Mortgage Lender.
