How Much Money Do I Need To Buy A Home?
One of the first questions first time homebuyers always ask is how much money does it take to buy a home? Short answer: $1,000,000….just kidding, that should get the old heart beating.
First of all, and I know you know this, but just in case….you don’t buy a house with cash, well, most of us don’t. Those of you living in the real world will have a mortgage on your first home, so the bank is in partnership with you. The mortgage issued by the bank on your home will take care of the majority of the money needed, but you will need some funds of your own to make up the difference. Here is the breakdown of what you will need.
Whether you are a first time homebuyer, investor, buying a vacation home, condo,you get the idea, you will need earnest money in order to make the offer. This literally means you are in “earnest” about the the offer. Dates back to medieval times…some things never change….but you still have to have it.
Customarily this is $500-$1000 in the first time homebuyer range, more if you are buying anything over $350,000 (I am assuming that since this series is about buying your first home, the $350,000 doesn’t apply to you , at least in Salt Lake City). This money is placed in escrow to be applied to the purchase price when you close on your home. More about that later…don’t get impatient!
This is the biggy when you are buying your first home, coming up with the down payment. This amount will be anywhere from 3.5 % for an FHA loan and 5%,10% or up to 20% if you are buying conventional (these amounts are based on the sales price). You will need this when you close in addition to whatever the bank is funding.
On a brighter note, there are some programs for first time homebuyers that do not require down payments. In Salt Lake City those programs are Utah Housing, and in more rural areas (wait for it) Utah RURAL Housing loans. If you are a veteran, you also have the ability to finance 100%. There are also city grants that first time homebuyers can utilize to help with down payment.
These are the various fees and costs to purchase your loan (didn’t think you were doing that, right? But…you are!) and the fees for appraisals, recording, title insurance, and the list goes on. Rule of thumb is that those costs run around 3% of the sales price. More Info On Closing Costs
When you are purchasing your first home, you can usually negotiate to have those costs paid by the seller, talk to your trusty Realtor (we would be a great resource here…ok blatant commercial).
So that’s about it. The answer to the age old question: As a first time homebuyer, how much money do I need to buy a home?
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