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January 4, 2024

First-Time Home Buyers – What You Need To Know About Saving for a Home

If you are looking to buy a home soon, we are sure you have been doing some saving. However, saving becomes a much easier process if you know exactly what you’re saving for. We at SRG are here to help you plan and strategize your budget to avoid any surprises along the way.

 1. Down Payment

For many, this is the obvious one, as down payments on a home are almost always a must. But do you know how much you need? For many, the amount of money for a down payment is perceived as much higher than reality, which is the myth of needing to put 20% down every time. Your down payment completely depends on the amount of money you have saved, your home-buying goals, and of course, what assistance programs you qualify for. Today, there are many fantastic first-time home buyer mortgage programs, including FHA which allows putting as little as 3.5% down. We recommend all first-time home buyers pair with a real estate professional, like Jim Slater, to understand all the options available to them, and then find a trusted lender to go into further detail with their desired needs. 

2. Closing Costs

Closing costs are overlooked by many. Closing costs consist of the collection of fees and payments made to all parties involved in your transaction including the title company, the state, commissions, broker fees, mortgage company, etc.. Closing costs vary from each transaction but can be expected to cost 3% of your mortgage payment. Most mortgage professionals will say that sellers can cover the buyer’s closing costs, which is not the case. Buyers cover their closing costs unless negotiated otherwise in the sale of the home. Once again, the best way to prepare for these costs is to work with a trusted real estate professional and lender to help guide you through what these costs consist of. 

3. Earnest Money Deposit

Earnest money is the deposit made directly after your offer is accepted as a show of commitment to the home. Earnest money is typically around 1% of the purchase price and delivered no later than two days after the offer has been accepted. It is important to note that this deposit is not an additional cost but rather is paid upfront as a sign of commitment, and held by either one of the brokerages or title companies in an escrow account and then applied to your total costs at closing (closing costs and down payment). Earnest money is also something you have the chance to lose if you are the one to breach an accepted contract. It is also important to note that an earnest money deposit is not required and does not guarantee your offer will be accepted. This is another reason to work closely with a real estate professional through this process. 

Bottom Line

When saving, keep these three things in mind. For the best understanding, consider this equation: (Down Payment + Closing Costs) – Earnest Money Deposit = Cash Brought to Closing. Connect with Jim Slater today to help you fully understand this process and budget correctly.  


Coldwell Banker Realty

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First-Time Home Buyers – What You Need To Know About Saving for a Home

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