If you have big dreams of buying a home of your own, you’ll want to take the necessary steps to make that dream a reality. One step will be preparing your finances. There are many ways to prepare, such as starting a savings account, comparing interest rates, and knowing how much cash you need to have on hand to buy a house.
An informed homebuyer will make smarter decisions throughout the homebuying process, which is why it’s important to plan ahead. There are a variety of payments that you’ll need to make in order to secure your home, and with the help of lenders such as Solarity Credit Union, you can start a savings account and secure a competitive rate on your new mortgage. With a little knowledge of the process, you can start budgeting and saving now so that you have the cash you need when the time comes.
Here are a few things you’ll need to pay for in cash when buying a house.
Down Payment
One of the costs you’ll need to account for when buying a house is your down payment. The down payment is the part of the home purchase price that you pay up front. The remaining balance on the home will be your new loan amount. The amount of cash you need for a down payment varies based on the overall price of the home and the percentage you agree on with your lender. Traditionally, new homebuyers have been expected to pay at least 20 percent of a home’s price as a down payment, but now there’s more flexibility to make homebuying possible for people with less cash on hand.
While there are definitely benefits to putting more money down on your home, some lenders now allow you to put as little as 5 percent, 3 percent, or even 0 percent down on a home. Different types of loans have different terms that outline the percentage needed for a down payment to secure your loan. VA loans, for instance, allow veterans to obtain a mortgage with zero down, which can greatly decrease the amount of cash needed to buy a home.
First-time homebuyer programs also offer homebuyers the option to put a smaller percentage down. Talk with a professional to find out which loans you qualify for and how much cash you’ll be required to put down on your home.
Closing Costs
You’ll also need cash to cover closing costs when you buy a home. This is a cost that many potential homeowners don’t consider when they start saving for a home. Closing costs pay for the services needed to secure your home purchase and don’t go toward the mortgage or total price of the house. Instead, they go toward the legalities needed to finish the homebuying process and get you in your new home in a timely manner. These can include the appraisal, a home inspection, underwriting costs, and payments to municipalities and the title company. Being prepared for these expenses is a great way to start your homebuying process off on the right path.
Earnest Money
Buying a home can be a competitive process, but that shouldn’t deter you from moving forward. It just means that you may want to consider saving up more cash to put toward earnest fees, which can better your chances of getting the home you want. Earnest money is a cash deposit the buyer makes to the seller after their offer has been accepted. It’s a way to signal to the seller that you’re serious about buying the home and can potentially sway them into accepting your offer over others.
While earnest money isn’t exactly an extra cash payment, it is a payment that needs to be surrendered right after your offer is accepted, which can be weeks away from your closing date. This money will go toward your down payment or closing costs at closing. You may not have to pay this expense, but it doesn’t hurt to save for it just in case.
Moving Costs
Moving can be expensive, especially if you have a lot of items in your current home. While the amount you spend can vary depending on your situation, you’ll definitely want to account for moving costs when saving cash to buy a home. For instance, if you’re moving out of state, you may want to consider hiring help. If you’re staying local, you can probably bet on the help of friends and family and save some cash that way, but you’ll still have expenses, such as renting a moving truck, paying for moving supplies, and purchasing the items that will make your new house a home. Accounting for these ahead of time can save you some unneeded stress when moving day rolls around.
Mortgage Payment
Your mortgage payment is one of the final things that you’ll want to account for when figuring out how much cash you need to buy a home. After you pay your down payment, closing costs, and potential earnest money and secure your loan with a credit union, you’ll be expected to start making mortgage payments. These payments will start right away, and your financial institution will expect you to make them in a timely manner.
You should be prepared for the cost and include a few payments in your budget when figuring out how much cash you’ll need to buy your home. You won’t want to zero out at the end of the homebuying process or struggle to come up with the money needed to make your first mortgage payments. Being prepared can go a long way toward giving you peace of mind.
Buying a home is an exciting time in your life, which is why it’s so important to come prepared with the cash needed to make the process seamless. Every situation is different, and if you’re wondering how much cash you need to buy a house, talking to a home loan professional can set you on the right track. If you’re ready to get started, speak with an expert at Solarity Credit Union to discuss your savings and mortgage loan options.
