Understanding How Much Money You Save Before Buying a House?

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Let's look at some simple ways to s ave up money before you begin house hunting so that you can afford your dream home!

As you think about purchasing a new home, suddenly many thoughts start to swirl through your head. We want you to be prepared for the process of buying a house, no matter how exciting it may seem.

How much money do I need in order to purchase a home? What amount should I put aside every month? You will want the answers to these questions before you begin your home tour and showings.

This is a common question that Real estate agents get asked. The answer will depend on your budget and what you are willing to spend. It is important to speak with a mortgage lender to determine your purchasing power.

The amount that you need to save will be affected by your target Purchase Price. The type of loan you are going to acquire will also affect the amount that you should be saving.

Consider the following:

  • What is the minimum 20% down payment for a conventional loan?

  • What is the minimum amount I will need to pay to get an FHA loan?

  • What is the minimum amount of money I should have for a VA Loan?

How Much Money Should I Save for a Down Payment?

Ask the loan officer how much cash you need to have on hand during the process of buying a home. Most lenders will say that you need to have a deposit of about 20% of the Purchase Price.

You can benefit from 20% for many reasons. Once you put down 20% of your monthly mortgage payment, the bank won't add private mortgage insurance to it.

We understand that many Americans don't have this option. That's okay! It is possible to secure a mortgage without putting down 20%.

Many banks offer as little as 3% as a down payment, making it more affordable for most homebuyers. It is important to speak with a mortgage lender as soon as you can so that the pre-approval procedure can begin. To ensure an accurate pre-approval, you will need to submit your loan documents to your loan officer.

You will know the minimum amount you need to pay for your house once you have received your pre-approval.

It is time to review what you can use. If you want to, you could save some money to pay for closing expenses, deposits, and inspections.

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What Are the Typical Closing Costs?

Closing costs can vary greatly based on the amount you pay. Please note that the amounts shown will vary depending on your purchase price.

We will use a $400,001 Purchase Price as our example. In most cases, you'll pay for the inspection and the bank appraisal after closing. We will therefore leave them off this list.

  • The loan origination fee is $4,000 (1 % of the purchase price).

  • Loan Application Fee: $300

  • Prepaid Interest: $250

  • Prepaid Property Taxes: $1,200

  • Prepaid Homeowners' Insurance: $900

  • Title Insurance: $500

  • Deed Registration: $90.00

  • Close-out Attorney Fee: $950

  • Survey: $700

  • HOA Transfer Fee: 100 Dollars

Total amount due for closing costs: $8,990

Your closing attorney will tell you how much you need to bring at closing.

In this example, 10% is the deposit. To close the deal, you would need $40,000 + $8.990 = $48,990 in cash. This amount will usually be wired directly from your bank to the closing attorney.

How Can I Save Money Before I Start House Hunting?

You must remember that purchasing a home takes time and requires you to start somewhere. You will need to make sure that you have a healthy budget and are modest in your spending before you start the process.

1. How to Get Rid of Subscriptions

Get rid of the monthly subscriptions you don't need! Many Americans subscribe to streaming services such as Netflix and Hulu. While we love our entertainment and want to enjoy it, you should limit your subscriptions to just two! Your wallet and you won't miss these streaming services when they are gone. You can choose your two favorite streaming services, and then delete the rest. We'll be grateful to you later.

2. Internet and Cable Promotions: Take Advantage

Call your cable and internet providers to see if any specials can help you lower the monthly bill. These companies often run promotional offers that you could qualify for. All you have to do is simply ask. Often, you will find that making a simple phone call can save you hundreds.

3. Eat at Home

Stop eating out and spend more time cooking at home! You may enjoy a night of fun where you do not have to cook, but your dream home is only a few steps away, so it's time to make some sacrifices. Choose one night per week to eat out. Dust off your cookbooks and start cooking at home. It's easy for many people to do this because it is just a matter of readjusting their habits and changing their habits.

4. Buy Unused Furniture

Sell any furniture or decor you don't need and won't take with you when you move. Once you find the home of your dreams you'll need to purge your belongings and decide which ones will stay and which ones will go. Why not begin now? Take inventory of items that you no longer desire. Polish them up, and then sell them. This is a great way to make some extra money and to downsize your belongings before moving.

5. Shoppers, Hold Off on Personal Shopping

Hold off on your shopping. So long, Amazon! We will miss your presence. We will miss you, but we will be back soon. While you resist the urge to buy personal items, remember that you're saving money for your move to a new home. You will need to purchase many items to decorate your new house, so don't spend money now.

6. Ask For A Raise At Your Work

Ask for a pay raise! It's been a while since you last had a review. It's a good idea to talk to your employer if you haven't had a review in a while. In this world, it's important to know your value. If the timing is right, you will benefit in the end when you are ready to get a big loan from a lender.

7. Savings Automated

If you haven't done so already, automate your savings. It can be as simple as setting up your bank so that $75 is automatically transferred each week to your savings account. You'll be surprised at how quickly the amount builds up.

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8. Plan Your Vacation for a Later Date

You can put off vacationing. If you need to schedule something, it's a good idea to say that you will not be taking any additional vacations when you buy your next home. These small sacrifices will get you to the final table quicker!

Can I Use a “Gift”, Towards My Down Payment?

Your family may have offered money to first-time homebuyers. We always recommend that you ask your lender about their requirements.

The lender will often ask for proof that the money entered your account. Sometimes, a letter explaining the gift may be required.

It can be difficult for Americans to save enough money for their first home. You will still need equity to bridge the gap and you should start building equity as soon as possible.

We say, use all the resources available to you! To enter the Real Estate Market, you must first purchase a house. You will do better planning your future if you get into the market sooner.

Owning a house can provide stability and be a valuable asset. After reading this article you will realize that renting a house is not always the best option.

Gifts are always appreciated, but they may not be helpful in the world of lending. The more money that you have in your bank, the larger your budget will be.

The answer is yes. Be as honest as you can with your lender. Let them know if your financial situation changes. Lenders want to avoid surprises. The more you tell them, the better.

Saving to Buy a Home - Last Thoughts

You're probably reading this article because you are thinking about purchasing a home. But you don't know where to start. We hope that after reading this article you will have a better understanding of what it takes to buy a house and what financial situation is best for you.

You have many options when it comes to lending. Save as much money as you can and always pay your bills on time.

When you feel like you're ready to start looking to buy that house, be sure to sell homes.

Hire a Realty State Agent Today!

Iron Key Realty is a Veteran-led real estate agent in Raleigh NC! We’ll be unlocking your Triangle Region dreams. Our agents will guide buyers & sellers in Apex, Cary, Holly Springs, Raleigh, Fuquay-Varina & beyond. Iron Key Realty will navigate real estate complexities with you, providing exceptional service, education, & realistic expectations.

Selling a home? Or Buying a Home? Contact us now!

Share this article with anyone you know who is thinking about buying or selling a home. We are happy to assist anyone who is looking for a guide or has a question about buying or selling.

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