Wilmington and Burgaw Area Real Estate News

Most people understand that they can fund a home purchase with a mortgage that often requires a down payment. What isn’t clear is exactly how much money is required upfront when purchasing a home. If you are thinking of making a real estate purchase in the future, it’s a good idea to have an idea of what amount you will be required to bring to the table and start saving for that fund as soon as possible. Here are some points you will want to keep in mind when determining the amount you should save.

The down payment is the largest portion of the money you will be required to provide before purchasing a home. This amount depends on the type of mortgage you are able to secure. A mortgage calculator can give you an idea of what that amount will, but a lender can tell you exactly how much when they prequalify you for a mortgage. Traditional mortgages can be 10-20% of the purchase price of the home, but there are special programs that may require none or an amount as low as 3% (FHA mortgages).

Once your down payment is saved and you find a home you want to submit an offer on, you will be required to provide earnest money, which is a gesture to show you are serious about buying. Traditionally, that’s between $500 and $2000. The earnest money is held in a trust account by the seller’s real estate agent brokerage. If your offer is accepted, that deposit goes toward the down payment or closing costs. If your offer is rejected, that earnest money is returned to you. The only time you may lose your earnest money is if a dispute arises during the transaction process.

After your offer is accepted, inspections are made, and you decide to go through with the purchase of the home, you will need to provide money that covers your closing costs. The costs include the title exam, title binder, recording, paperwork processing, survey (if requested), and mailing fees. These fees vary, but an estimate can be provided by the lender. They average 3-4% of the purchase price of the home; however, many sellers in today’s market are either offering to pay closing costs or can be negotiated to pay closing costs. This is an option you can discuss with your real estate agent.

Much of the headache of saving can be reduced by first meeting with a lender to discuss your options. Even if you aren’t sure that now is the right time for you to buy, they can give you a good idea of what you’ll be able to afford, how much you should save, and how you can improve your finances to qualify for mortgages that will save you money in the long run. Also, check with the U.S. Department of Urban Development and local governments. There may be programs that fit your specific circumstances that will help you to purchase a home with no down payment or provide other financial assistance.