If you think you need to have a lot of money saved up for a down payment before you buy a home, you’re wrong! Most people think you need a large 20% down to buy a home. On a $300,000 home that equals out to be (just for those that are mathematically impaired) $60,000! Myth BUSTED!
You don’t need THAT much cash to buy a home, but there are typically a lot of expenses that aren’t always discussed.
1. If I don’t need 20% down, how much do I need?
It all depends! There are many different options available now. Many banks and lenders have 0% down financing options through government insured loans and in-house options. An FHA (Federal Housing Authority) loan may be a good option for you as well which can offer home loans with only 3.5% down.
Don’t take it from me! A licensed mortgage professional can explain it WAY better than I can, and they can discuss with you what type of options would be available for you specifically!
Need a lender? Click here for my list of recommendations
2. Plan for inspection costs
Please, please, please get a professional inspection done on your home. They may only find a ton of little items that aren’t up to code, but they could also find some major issues that need to be addressed. Your uncle Joe that’s worked construction all his life is awesome, but he builds homes, not inspects them. A trained and licensed inspector checks out homes every day and has a trained eye to spot anything that’s out of place or needs attention.
NOW, with that out of the way, inspections in Middle Tennessee areas (Nashville, Franklin, Spring Hill) do cost between $300-$500 on average and in some rare cases, could cost more. You will also need to allow for a termite letter (just a document stating whether or not the presence of termites were found in the home. Most lenders need one of these). They average around $60-$100 with $100 being on the high side. Don’t know who does that? Don’t worry, we do!
3. Appraisal Fee
All banks will typically want an appraisal done on the house. I’ve only seen some VERY rare instances where it was waived due to COVID-19. Most lenders will ask for this fee up front and is due before the appraisal can be ordered. Expect to pay in the ballpark of $500-$600 for your appraisal.
tired of reading? Just Schedule a Call. we can handle it for you.
4. Closing Costs
Yep, there is always closing costs. Most often there is always some confusion surrounding who pays for the closing costs. While it is true that we can request the sellers to pay closing, the buyer is the one who ultimately always pays them.
Example: Let’s say a seller is willing to accept $300,000 as an offer on their home and not a penny less. Let’s just say hypothetically your closing costs have been estimated by the lender to be $6500. You can offer $306,500 and request the seller to pay up to $6,500 in closing costs (which will give the seller the $300,000 they want after closing costs are paid) or you can get the home for $300,000 and you pay the closing costs out of pocket. Offering more to get your closing costs covered is one of the only ways to get the closing costs “financed”. Still not clear? I can help explain and answer questions. Call me!
We have a better understanding of who pays, now we need to know what it costs. Again, it really varies, and it’s so difficult to throw a number out there which is accurate for everyone. On average we see closing costs to be around 2-4% of the purchase price depending on the purchase price of the home. Some loans have greater closing costs and some are much, much lower (but they will have higher qualification standards).
I hate to be repetitive, but this is a better conversation for a lender after you present all your information to see what can work specifically fo you and your financial situation.
Now you know!
You may not know exactly, but you have a better idea, and you now know what to ask a lender when you have that conversation. I felt so ignorant talking to a lender when we bought our first home (before entering the business). I had no idea what to ask or talk to them about. Now you are armed with lots of questions. I’ll recap the questions for your lender we discussed previously and add a few below!
How much of a down payment do I need?
How much do I qualify to purchase?
How much do you estimate my payments to be at that price?
Do I need to pay for my appraisal upfront?
How much should I expect to pay in closing costs?
I know, I know, it seems like A LOT. It is a lot and it can get confusing and frustrating in a hurry. That’s why we walk you through step by step, so you don’t need to have it all figured out. We take it one bite at a time and work hard to take as much off your plate, so you can focus on what matters most!