Real Estate Blog

How much cash up front do you need to purchase a home? It’s a good question, and the first one you really need to answer. Second question you need to answer is: Do I qualify for a loan? We’ll address the second question at another time. Right now, I just want to give you a VERY rough estimate of the amount of money you will need to have in cash, in order to purchase a home.

In order to get the best interest rate and avoid paying the extra monthly cost of mortgage insurance, you’ll have to put down at least 20% of the purchase price. On a $100K home, that would be $20,000. However, if you qualify, you can finance using an FHA mortgage and put down just 3.5%, which would be just $3,500 down payment on a $100K home. There are even some homes that you will need just 3% down, they are sold through FannieMae and the program is called HomePath. I’ll go over that at another time, or you can call me if you’re interested. Also, visit www.homepath.com.

In addition to your down payment, you’ll need to pay for a bank appraisal, a year’s worth of home owner’s insurance, a home inspection (optional but strongly recommended), and closing costs. Sometimes, we can get the seller to pay the closing costs but not always. It’s really a case-by-case basis.

I’ve outlined most of the basic costs you will incur up front to purchase your home. The first is with the seller paying your closing costs and the second number is adding those closing costs to your needs. Keep in mind, that if you are a first time home buyer, you will get an $8,000 Tax Credit next year, which is a good chunk of those costs back to you. Not a bad deal at all! It really is a great time to be a first time home buyer. Don’t assume you cannot afford a home. Save as much as you can and then talk to a mortgage broker to see if you qualify. If you don’t for some reason, he/she can give you advice on what you need to do in order to qualify in the future. Trust me, home ownership is well worth the sacrifice it takes to save up a down payment.