The other day, I was talking to a couple friends of mine that are starting their journey to home ownership. They asked me a great question: “What’s the least amount of money we need to buy a house?” Of course, there is no one magic number that I or anyone else can give that applies to everyone. First things first, to get the best picture of what you can afford, it’s imperative that you talk to a great loan officer. They are the money experts, and they will be able to take a look at your pay stubs, bank accounts, credit scores, and any other financial materials to determine what you can afford. They will help you figure out the right type of loan for your needs and how much you can be pre-approved for.
There are a few number you can look at to get a ball park range of what your costs may be, though. Firstly, know that it’s not always necessary to put a 20% down payment. There are loan programs available that range from the typical 20% we all know, to as little as nothing down. FHA loans, which are insured by the government require 3.5% down.
The down payment is just the first chunk of money to pay attention to, however. Buyers need to be ready to pay for inspections on homes they would like to put an offer on. Inspections typically range from $300-$500, but can be variable by location. Websites like Angieslist.com are a great resource for comparing costs in your area. Expect to pay more as well if you plan on including a sewer scope or radon testing. A lot of buyers are tempted to bypass these inspections to save some cash, but skipping an inspection can be more costly in the long run. Finding out about defects in the home before you move in can give you some leverage in negotiations, and you may be able to get the seller to fix it or give you a credit at closing for any problems. If nothing else, the peace of mind knowing that there are no hidden secrets in your home is worth the cost in my opinion.
Lastly, come the closing costs. A good rule of thumb is that you will typically owe about 2.5% of the purchase price in closing costs. Credit.com has a nice break down for price ranges when you’re putting down less than 20%:
- For a home purchase between $500,000-$600,000, you’ll need at least $10,000 for closing costs
- Between $300,000-$500,000, at least $8,000-$10,000 for closing costs
- Between $150,000 $300,000, at least $7,200 for closing costs
Hopefully, this is a good jumping off point for you. Again, to get a better grasp on what costs you’ll be paying, talk to a mortgage broker. They’re the only ones who can give you real, professional advice. If you’re in the Portland area and are looking for an excellent broker, contact me and I can put you in touch with one that will suit your home buying needs.
Did I miss anything? Any other tips? Let me know in the comments!
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