When you’re contemplating a purchase, it’s only natural to wonder how much money you’re going to need to pull it off. For aspiring homeowners, the question can be particularly complicated. After all, there are a variety of costs involved in the purchase, and you need to be prepared for them. How much money do you need to buy a house?
How Much Money Do You Need to Buy a House?
If you’re planning to buy a home, then you’re probably already thinking about a down payment. While that’s one of the expenses involved in buying a home, it’s not the only one that you’ll need to come up with cash for. How much money do you need to buy a house? To get an idea of how much you’ll need, consider the various costs that you’re likely to encounter.
The Down Payment
How much do you need for a down payment? As Credit.com points out, that depends on your financial goals and the type of home loan that you’re using to purchase your home. You’ll only need to come up with a 20-percent down payment if you’ve got your heart set on using a conventional loan and avoiding private mortgage insurance. If you’re willing to consider other possibilities, then your down payment can be as little as zero with a USDA loan, which offers up to 100-percent financing. FHA loans are another popular choice. Borrowers who qualify can make a down payment as low as 3.5 percent. Even with a conventional loan, a 20-percent down payment isn’t a must. Many lenders are willing to accept down payments of 5 percent, but you will have to pay PMI.
Closing Costs
Closing costs are the fees owed to your lender and other assorted parties for the services that they provided during the purchase of your new home. As NerdWallet indicates, closing costs generally run around two to five percent of your home’s purchase price. So, if you pay $250,000 for your home, you can expect your closing costs to run between $5,000 and $12,500 in closing costs. Before your closing date, your lender will give you an official Loan Estimate that outlines your closing costs. Normally, closing costs are split between the buyer and seller, but the exact details are negotiable.
Moving Costs
Once you close on your new home, you’re going to want to move into it. You might be lucky enough to have lots of friends and family members who are willing to help you transfer your stuff. However, that’s not always the case. Sometimes, there’s a sizeable distance between the place you’re moving from and your new home. In other cases, you may not have the manpower or equipment needed to make the move. Or, you may simply prefer to have professionals do the job. Moving costs vary depending on factors like how much you have to move, how much help you need moving it, and how far you’re moving it. As The Mortgage Reports notes, if you’re moving from one part of the country to another, you can expect to pay $3,000 to $5,000.
Maintenance Costs
As you settle into your new home, you’ll likely notice things here and there that need doing. It could be small repairs. A drawer may be missing a knob, a faucet may develop a drip, or a wall may need repainting after being badly scuffed on move-in day. Or, you may want to make improvements by updating the kitchen with new window treatments or replacing your living room furniture with a new set that fits the space better. As CNBC reports, having funds set aside to deal with these concerns will make your transition to homeownership less stressful and more pleasant.
Emergency Funds
Although the pressure to come up with a down payment can feel intense, buying a house shouldn’t leave you cash poor. As MillionAcres insists, every property owner should have an emergency fund. A serious injury, a job loss, or an unexpected catastrophe at the home could leave you dealing with surprise bills, so having a financial cushion is invaluable. Experts recommend having at least three to six months of your essential living expenses socked away for a rainy day.
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