This is a question you want the answer to before beginning the process to purchase a home. How much YOU will need varies depending on the type of financing you’ll be using to purchase the home. In general you should probably have at least $10,000 in liquid funds in order to purchase a property; however, if you qualify for a 0 down VA loan it’s possible you could close on your purchase with very little. Here is an overview of the most common fees you should be prepared for:
- Earnest Money: Budget a minimum of $1,000 and most commonly you can plan for earnest money to be approximately 1% of the purchase price (example $300,000 home = around $3,000 in earnest money). The minimum amount acceptable by a Seller is listed in the MLS and depending on circumstances can be negotiated up or down. Earnest Money is typically due 1-7 days after going under contract on a property.
- Inspection: Budget a minimum of $350 and most commonly total inspection fees will be in the range of $500-$800. While you are not required to have the home inspected, it’s strongly advised. There are various kinds of inspections to consider and inspection costs can vary from $300 up to $1,500+. The home inspector(s) will require payment at the time of the inspection which is typically 2-14 days after going under contract.
- Appraisal: Budget $600-$800. The appraisal will be ordered by your lender and the fee is most commonly collected at the time of the order which is usually a 5-15 days after going under contract. In some circumstances an appraisal waiver may be approved or you might receive approval to pay for the appraisal as part of your closing costs.
- Down Payment: Budget discuss with your lender. Your minimum down payment is determined by the loan program you will be utilizing. Minimum down payments typically run between 0-20% down. The most common 0 down loan program is for Buyers who qualify for VA financing, FHA offers 3.5% down and there are Conventional loan programs for 5%, 10% and 20% down. If you are getting help from family or friends, gifting money can often be used toward your down payment – your lender will likely require a gift letter and there can be limitations on the maximum amount gifted. Down payment will be part of your final settlement figures and be due before your closing begins.
- Closing Costs: Budget discuss with your lender. Buyer closing costs can vary. If you prefer lower closing costs you can typically finance a portion into your loan or depending on circumstances you may be able to negotiate a “Concession” from the Seller to be credited toward your closing costs. Closing costs will be part of your final settlement figures and due before your closing begins.
I look forward to hearing from you anytime you have questions and when you’re ready to begin finding the home of your dreams.
More about down payments with various loan programs
There are many financing options available for buyers today. If you don’t have enough saved for 20% down, home ownership is still within reach. There are even programs available for as little as 3.5% or even 0% down.
0% Down Payment
- VA – if you qualify for a VA loan, you’re able to finance the entire purchase price – yes including your down payment.
- Down payment assistance programs and government subsidized grants are also available in many areas if you meet various criteria. A great program currently available in most of the Denver area is the Metro Mortgage Assistance Plus. This special grant program provides up to 4% of your loan to assist with down payment and closing costs. You must have a minimum FICO score of 640, and your household income cannot exceed $91,000. For more information visit the MMAP website.
3.5% Down Payment
- FHA loans – if you qualify for an FHA loan your payment can be as low as 3.5% of the purchase price and most of your closing costs and fees may be included in the loan.
5 or 10% Down Payment
- With 5 or 10% down you may qualify for a conventional loan, which typically offers a lower rate.
20% Down Payment
- With 20% down and loan qualification you will be able to avoid mortgage insurance and will have a variety of loan programs available to choose from.
The best way to determine the options you qualify for is to speak with a reputable loan officer who will be able to consult you and help weigh the options. If you’re seeking a lender, I’d be happy to provide a list of several lenders who have provided excellent service to past clients.
Buying a home is an exciting time and one of life’s most important investments. Good luck in your search and I hope to serve you when you are in the market to buy or sell your home.
