Buying a home is a major milestone, and understanding what to save for can make the process smoother and less stressful. Here’s a quick guide to help you budget confidently as you prepare for this exciting step:
1. Down Payment
Your down payment is likely top of mind when saving for a home. A common misconception is that you need 20% of the purchase price, but that’s not always true. Depending on your loan type and financial situation, you might qualify for options requiring as little as 3.5% or even 0% down.
A trusted lender can guide you through your options, explain down payment assistance programs, and help you determine what works best for your financial goals. Knowing this information early will give you clarity and peace of mind.
2. Closing Costs
In addition to your down payment, you’ll need to budget for closing costs. These fees typically range from 2-5% of the loan amount and cover expenses like:
Appraisals
Title insurance
Loan origination and underwriting
Your lender can provide an estimate of these costs so you can plan accordingly. Don’t forget to also account for your real estate agent’s professional service fee, if it’s not covered by the seller. Your agent will discuss this with you upfront, so there won’t be any surprises at closing.
3. Earnest Money Deposit
An earnest money deposit (EMD) is a good-faith payment that shows the seller you’re serious about buying their home. Typically, this is 1-2% of the total home price. While not mandatory, an EMD can strengthen your offer.
The good news? This isn’t an additional cost. It’s applied to your down payment or closing costs later. Your real estate advisor can help you decide whether an EMD is necessary and guide you through the process.
Bottom Line
The key to a successful homebuying savings strategy is understanding what to expect. By budgeting for these key expenses and working with experienced professionals, like a local real estate agent and a trusted lender, you’ll be equipped to make informed decisions and move forward with confidence.
Ready to take the next step? Let’s connect and make your homeownership dreams a reality!
