Down Payment – How much money do you need?
Homes for sale in The Woodlands, Texas and surrounding areas.
So, you’ve decided you want to purchase a home?
How much cash should you have in the bank?
Right now, you can purchase a home with as little as a 3% down payment. Let’s say you are buying a $300,000 home. Does that mean you only need $9,000? The answer is: NO.
There are other expenses you will have to consider.
First of all, you will want to hire an inspector to inspect the property for any damages before you make your purchase. This can cost anywhere from $300 to over $500. It just depends on the inspector and how detailed you want them to be. Usually, you will also want a termite inspection that will cost around $100 and can sometimes be included in your home inspection.
Next, you will need to pay for an appraisal. The lender is not going to give you a loan to purchase a home unless they know the value of the property. This will also cost from $300 to $500 depending on the appraiser that is used. The lender will choose the appraiser and tell you how much it will cost.
Now you are into this for maybe $1,000 and you haven’t even purchased the home yet. There are financial risks you will take when making an offer to purchase a home. Sometimes, the deal will not work out and you will lose your money. Hopefully, the home you purchase will pass the inspection without any major problems and you will not have a problem getting approved for your loan to purchase the property.
Finally, there are other closing costs you will have to pay and you will likely have to set up escrows for your new loan. The escrow account will be set up to cover your taxes and insurance for the first 3 months, and the other costs will involve many different closing fees. Your lender will give you an estimate of these costs when you apply for a loan. Much of this will depend on the value of the home you purchase. You can roughly estimate that you will spend around $3,000 for every $100,000 in value of the home. This money will be due at closing on top of your down payment.
Back to our example of purchasing a $300,000 home with a 3% down payment.
You will spend:
$1,000 – inspections and appraisal
$9,000 – closing costs
$9,000 – down payment
This means you will need $19,000 in total cash to purchase a $300,000 home. You should consider all of these costs before you start shopping for a home. Please let me know if you have any questions.