Taking the Fear out of Saving for a Home

By
Real Estate Broker/Owner with The Real Estate Agency (Office License: 265417) 317824

 

Taking the Fear out of Saving for a Home

If you’re planning to buy a home, knowing what to budget for and how to save may sound scary at first. But it doesn’t have to be. One way to take the fear out of budgeting is understanding some of the costs you might encounter.  And to do that, turn to trusted real estate professionals. They can help you plan your finances and prepare your budget.

Here are just a few costs experts say you can expect.

1. Down Payment

Saving for your down payment is likely top of mind as you set out to buy a home. But do you know how much you’ll need to save? While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. An article from the Mortgage Reports explains why that’s not always the case:

“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.”

To understand your options, partner with a trusted real estate professional to go over the various loan types, down payment assistance programs, and what each one requires.

2. Closing Costs

Make sure you also budget for closing costs, which are a collection of fees and payments made to the various people involved in your transaction. Bankrate explains:

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.”

The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have.

3. Earnest Money Deposit

If you want to cover all your bases, you can also consider saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. According to realtor.com, it’s usually between 1% and 2% of the total home price.

This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. Realtor.com describes how it works 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, earnest money is just paying more of the down payment and closing costs upfront.”

Keep in mind, an EMD isn’t required, and it doesn’t guarantee your offer will be accepted. It’s important to work with a real estate advisor to understand what’s best for your situation and any specific requirements in your area. They’ll help you determine what moves you should make in the homebuying process to have the greatest success.

Bottom Line

Budgeting for your home purchase doesn’t have to be scary. Partner with a local real estate advisor so you’ll have an expert on your side to answer any questions you have along the way.

Source: Keeping Current Matters | The KCM Crew 10312022

Comments (6)

Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

Good advice/information Jennifer Carstensen -The Real Estate Agency . When I purchased my first home at the age of 18 I calculated what I could spend a month and then I found a house that fit. It wasn't much and I didn't get out to have as much fun as my friends in those early years but I wasn't making someone else's property payment. BTW I hosted a lot of parties so I didn't miss out on to much fun. 😊

Oct 31, 2022 07:17 PM
Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

Great points Jennifer. The good thing now in this Buyers market, sellers are more willing to negotiation on such things as buyer closing costs, home warranties and sometimes even on inspection costs to save buyers out of pocket expenses. Also, lenders are offering free appraisals and contributions to closing costs also. Ask your realtor about down payment assistance grants that may still be available. 

Oct 31, 2022 09:17 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Nov 01, 2022 02:57 AM
Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert

This is an excellent post with great information. Thanks for sharing it.

Have a super fantastic week!
Joe Jackson, Realtor-KWCP

Nov 01, 2022 05:43 AM
Jeffrey DiMuria 321.223.6253 Waves Realty
Waves Realty - Melbourne, FL
Florida Space Coast Homes

I really think people who are thinking about buying a home really do need a strategy to get the proper amount saved. 

Nov 01, 2022 08:55 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Jennifer and great information to share with us here in the rain.  Make it a great November!

 

Nov 01, 2022 09:13 AM