Q. How much money do I need to buy a home?
A. Typically, home buyers need about 6-7% of the purchase price to buy a home plus whatever down payment they choose to make on the home they are buying. For example, assume you want to buy a $200K home and put 5% down. The down payment is $10K plus expect another ~$13K in closing costs which totals $23K.
Closing costs typically include:
- Mortgage Fees ~2.25%
- Tax Escrows ~1.5%
- Transfer Tax ~1.0%
- Miscellaneous* ~0.5-1.0%
- Title Insurance ~0.75%
*Miscellaneous fees include the costs of the home inspections, recording fees, conveyancing fees, and tax reimbursements to the seller.
In this scenario and assuming a conventional mortgage with a rate of 4.75% over 30 years, your mortgage balance is $195K and the total monthly payment would be $1,244.54. This includes $991 for principal and interest, $212 for real estate taxes, and $42 for homeowners insurance.
There is another way to structure this purchase that will require less money at closing. An FHA (Federal Housing Authority) loan will allow for as little as 3.5% down. So if you offer $210K and ask the seller to pay $10K in closing costs (seller assist), you will only need ~$7,500 in cash to close.
Assuming the same mortgage rate (4.75%) over 30 years, your mortgage balance would be $206K and the total monthly payment would be $1,421.89. This includes $1,076 for principal and interest, $212 for real estate taxes, $42 for homeowners insurance, and $93 for mortgage insurance.
The key with using a seller assist is that the appraisal done by the lender must support the higher selling price ($210K in this case, not the $200K net selling price).
Now is a great time for home buyers. Home prices have come down, interest rates are still at historical lows, and the government is offering the first time home buyer tax credit of $8,000.
Contact Scott Loper, Associate Broker, Realtor®, RE/MAX Realty Group at 215-513-1333 to buy or sell a home in Lansdale, Harleysville, Hatfield, Souderton, Skippack, Collegeville, North Wales and the surrounding areas of Montgomery County Pennsylvania. To Search for Homes For Sale in Montgomery County Click Here.
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