Friday, November 4, 2022 / by Laura Larson
Knowing what to spend your money on and how to save may initially seem intimidating if you're intending to buy a house. But with these tips, it doesn’t have to be! Understanding some of the expenditures you might incur is one method to remove the fear associated with budgeting. And to achieve that, seek the advice of reputable real estate experts. They can assist you in creating a budget and financial strategy.
Here are a few ticket items that experts suggest you might anticipate.
1. The down payment
As you prepare to purchase a home, saving for your down payment is probably on your mind. But how much money will you actually need to put aside? Although every circumstance is unique, it's a frequent fallacy that 20% of the purchase price must be paid upfront. Why that's not often the case is explained in the following Mortgage Reports article:
“The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.”
You can reach out to a trusted expert to get a better understanding of all the loan options and down payment programs available to you!
2. Closing Expenses
A collection of fees and payments given to the numerous parties involved in your transaction constitute closing costs, so be sure to include them in your budget. Bankrate clarifies:
“Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.”
Working with a reputable lender is the best method to determine what you'll need at the closing table. You can ask them questions, and they can give you the answers.
3. Earnest Money Deposit
You might also think about setting aside money for an earnest money deposit if you want to be completely prepared (EMD). When you make an offer on a home, you must pay an EMD as a sign of your readiness. It often ranges between 1% and 2% of the overall home price,
This down payment functions as credit. Paying a percentage of your expenses in advance is not an additional charge. To demonstrate to the seller that you are serious and committed to their home, you are utilizing part of the funds you had already set aside for your purchase. According to a report, here's how it operates as part of your sale:
“It tells the real estate seller you’re in earnest as a buyer, . . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, the earnest money is just paying more of the down payment and closing costs upfront.”
Remember that an EMD is optional and does not guarantee that your offer will be accepted. Working with a real estate advisor will help you choose what's ideal for your circumstances and any local regulations that may apply. They'll assist you in deciding how to proceed in the home-buying process for maximum success.
Budgeting doesn't have to be a terrifying thing when buying a house. Join forces with Laura Larson to have a subject matter expert by your side to respond to any queries you may have along the journey.