I meet a lot of buyers that still think that they need 20% down to buy a home. The truth is that there are tons of loan options out there that offer lower down payments- ranging anywhere from zero percent down to 20% down. Depending on your credit, income and the location you want to purchase in, you may be eligible for a 100% down USDA rural housing loan. An FHA loan is 3.5% down. Traditionally a conventional loan is 20% down, but there are many lenders that are offering 3-5% down payments on conventional loan products.
But, when you are thinking of buying a home there are more expenses to consider than a down payment. Once you are under contract on a home you will have a ten day due diligence period to complete your home inspections. During this period you will want to hire a home inspector, hvac inspector, termite inspector, and any other inspectors that you see fit. Generally you can expect to spend anywhere from $500-700 on inspections.
You will also need to put down earnest money when making an offer on a home. Typically this is $500-1000 depending on the price range of the home. This will need to be submitted along with the offer and will be returned to you should your offer not be accepted. If accepted it will be deposited and applied to your closing.
The last expense to consider is the appraisal. Most lenders require that you pay for the appraisal in advance. Appraisals are around $500.
So you can expect to need at least $1000 in your bank account to get you through the home buying process. This does not include closing costs- which are a buyer expense but can be paid for by the seller if they agree. I have pretty good luck having my buyers closing costs paid for by the seller. Closing costs are generally 3% of the purchase price so they can add up to thousands of dollars. Having the seller cover those is a big help!
If you would like to set up a time to talk about the home buying process or for a first time home buyers guide please call me at 803-604-7736.
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