How Much Money Do I Need To Buy A Home

Q: How much money do I need to buy a home? More specifically what is the minimum amount of money a person would need saved to be qualified by a bank or lender to purchase a home?

A: How much money an individual will need to buy a home, will vary depending on the type of mortgage or home loan they receive, the price of the home they wish to buy, and possibly some additional factors depending on the type and terms of the home sale. Many first time home buyers are unaware that there are more costs associated with buying a home than just the down payment. For the typical home sale, the buyer of the home will need to have enough money to cover the down payment of the home, earnest money, and closing costs for the home.

How much money do I need for a down payment:
The down payment costs associated with buying a home will vary depending on the price of the home, and the type of home loan the buyer is eligible to receive. For the typical home sale, the homebuyer should be prepared to have 3-10% of the homes purchase price available for a down payment. However, depending on what type of mortgage loan a buyer qualifies for, there is a chance they could receive 100% financing, and not be required to have a down payment.

How much money do I need for earnest money:
Earnest money is the deposit a home buyer puts down when they submit their offer to buy the home. Earnest money is a way of showing the home seller “good faith”, and that the buyer is serious about purchasing the home. A typical deposit is between $500-$1000, and is held in escrow by an independent third party, likely the title company handling the paperwork for the home sale. Home buyers may come across different theories on earnest money, ways around it, or resources stating the earnest money can be as little as $1. Though there are always exceptions to the rules when it comes to real estate, the typical home buyer will likely have to come up with this money. The home buyers earnest money will be returned to the buyer if the buyers offer is rejected, or it will be applied to the down payment or closing costs if the buyers home offer is accepted.

How much money do I need for closing costs:
Closing costs on a home purchase can be attributed to lender fees and/or the costs associated with processing the paperwork to buy the home. Depending on the type of home loan or mortgage loan the home buyer receives, their closing costs may be taken care of. When a home buyer applies for their home loan, the lender will give them an estimate of what they can expect to pay for closing costs. The average closing costs are 3% of the cost of the home, and buyers may be able to negotiate with the seller to cover all or part of the closing costs.