How much money do you need to buy a house for the first time?
You're ready to buy your first home. You know where you want to live, and have a whole decorating plan, white picket fence and all. You just need to make sure you have money for the up front costs. Where should you begin? Do you know what all there is to pay for?
No worries. I'm here to go over that with you. There are different financing options, down payment assistance, and even gift funds that you can take advantage of. Unless you have 100% cash to put down, you are going to want to know this.
The more you save up, the better
If you have 10-15% set aside for your home purchase, this will lower your monthly payments. 20% down and you wont have to pay private mortgage insurance (PMI) and it will save you even more in the long run in you monthly payments.
Depends on your Loan
Most first time home buyers put down about 3-3.5% of the home's value, depending on the type of loan they obtain. If the home you are purchasing is $200,000, then you would need about $6,000 to $7,000 up front. Some loans, such as VA and USDA, require no down payment! If you meet the special requirements of those loans, then you could do a 0% down payment!
If you have 10-15% set aside for your home purchase, this will lower your monthly payments. 20% down and you wont have to pay private mortgage insurance (PMI) and it will save you even more in the long run in you monthly payments.
Down Payment Assistance
You many not have to cover the whole down payment if you don't do one of the no down payment options, though. There are grants and low-interest loans called down payment assistance programs that help first-time buyers with the up front costs of purchase a home. The state of Georgia has over 70 different programs and there are plenty of programs no matter which state in which you live. If you are in the state of Georgia and would like to check this out, click on the link below.
Gift Funds
Do you have a friend or relative that is willing to gift you the money? Certain types of loans allow you to receive part or all of your down payment as a gift. You will be required to provide legal proof that the funds are coming from a verified source. Your loan officer or real estate agent needs to know about any gift funds you will be receiving early in the process so as not to hold up the underwriting process and, ultimately, your closing date.
Hopefully this eases your mind a little bit that it's not as bad as you might have thought. If you would like more information about this, contact your favorite bank or call your local real estate agent and ask for their recommended mortgage lenders. If you live in Georgia, you can refer to my Vendor List to see who I recommend.
If you are curious about what goes into house prices, Check out this article:
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