How Much Cash Do I Need To Buy My
Home?
When purchasing your home, take the time to sit down with a
professional Mortgage Banker to get the best information on the
current home loan market situation. The home loan market is a
very dynamic market and conditions are changing constantly therefore
effecting the underwriting standards in place currently and you
must make sure that you are getting the most up to date information
to make the best decision for your financial well being.
There are three main components in the calculation for the amount
of money needed for closing a purchase home laon. They are as
follows:
1. Down payment
This is typically a percentage of the home purchase price. Down
payments start from 0%, (VA and USDA), 3.5% (FHA) and go up from
there. FHA loans are guaranteed by the federal gov’t and
are the only low down payment loans available that are not employment,
income or location restricted loans such as VA (Veterans Administration)
and USDA (United States Dept. of Agriculture) which are also
guaranteed for the federal gov’t. If you want to put more
down you can go to a conventional loan and these allow for the
minimum down payment of 5%. You can always put more down, but
you should discuss this with your Mortgage Banker to make sure
that the amount you want to put down fits in with your overall
financial situation. You do not want to run your accounts dry
and have no money left at the end of closing.
But remember when you put less than 20% down you will have mortgage
insurance which you can pay monthly, in a lump sum or split it
both ways depending on how your loan is structured for your financial
situation. Please see the Mortgage Insurance section of my website
for more information on how this fee is part of your loan if
you are putting down less than 20%.
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2. Closing Costs
Closing Costs are costs that are incurred when closing a home
loan. You can have your Realtor negotiate the closing costs to
be paid by the seller in full or in part or you must pay for
them in your cash to close. They normally are made up of the
following fees:
- Points (discount, origination, broker fees, loan fees)
- Appraisal fees (appraisal and management company fees, re-inspections)
- Credit Report Fees
- Flood Determination (third party verifies the home location pertaining
to floods)
- Tax Service (third party that verifies annually that
your property taxes are paid)
- Processing
- Underwriting
- Wire Fee
- Escrow Fees (closing, courier, gov’t charges,
remote closing fees)
- Title Insurance (ALTA Extended and Early Issues)
- And other fees associated with your home loan program
HUD has a booklet available here or in the Links area of my
website that covers this information as well, it is called Shopping
for Your Home Loan: HUD’s Settlement Cost Booklet. You
will also receive a copy of it as part of your loan package from
me with your loan application package.
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3. Pre-Paids
Pre-paids are not fees, but costs associated with the closing
of your home loan. They are usually made up of the following
items:
- Property Taxes
- Home Owners Insurance
- Daily Interest through the end of the month in closing
- Impound (aka Escrow or Reserves) Account Set Up for
your property taxes and home owners insurance
Keep in mind that the seller through your purchase negotiations
can pay if not all then most of these costs. This is something
you definitely want to think about since it can lower your cash
needed to close, sometimes substantially.
Also, if you do put 20% or more down, you can opt to pay the
property taxes and home owners insurance on your own and not
have the bank hold the money needed to pay these items annually
(or in Washington State, semi-annually).
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Experience extraordinary...
Call Theresa Springer today at 360-210-7984 to
see the difference that working with an experienced home
loan professional can make for you. |
