Home Buying

What You Need to Budget for When Buying a Home

When it comes to buying a home, it can feel a bit intimidating to know how much you need to save and where to find that information. But you should know, you’re not expected to have all the answers yourself. I will help you understand your finances and what you will need to budget for throughout the process. Here are a few things you need to plan for.

1. Down Payment

As you set your savings goal for your purchase, your down payment is likely already top of mind. And, like many other people, you may believe you need to set aside 20% of the home’s purchase price for that down payment. But, that’s not always the case.

You may be able to put as little as 3.5% (or even 0%) down in some situations. on I can go over the various loan types, down payment assistance programs and what each one requires.

2. Earnest Money Deposit

Another term you may want to plan for is an earnest money deposit. While it isn’t required, it’s common in today’s highly competitive market because it can help your offer stand out in a bidding war.

Earnest money deposit is money you pay as a show of good faith when you make an offer on a house. The deposit works like a credit. You’re using some of the money you already saved for your purchase to show the seller you are committed and serious about their house. It’s not an added expense, it’s just paying some of that up front. This deposit is typically held in trust by a third party. Upon closing the money will generally be applied to your down payment or closing costs. In other words, an earnest money deposit could be the very first check you will wite toward your purchase. The amount varies by state and situation.

3. Closing Costs

The next thing to plan for is your closing costs. The upfront fees charged in connection with a mortgage loan transaction generally include a loan origination fee, title examination and insurance, survey, attorney’s fee and prepaid items such as escrow deposits for taxes and insurance.

If you’re in the market to buy a home, your down payment is probably top of mind. And rightly so. However, it is not the only cost and it’s critical you understand all your expenses before diving in. The more prepared you are for your down payment, closing and other costs, the smoother your homebuying journey will be.

Bottom Line

Knowing what to budget for in the homebuying process is essential. To make sure you understand these and any other expenses that may come up, let’s get together.