What You Need To Budget for When Buying a Home
When it comes to buying a home, it can feel a bit intimidating to know how much you need to save and where to find that information. But you should know, you’re not expected to have all the answers yourself. There are many trusted professionals who can help you understand your finances and what you’ll need to budget for throughout the process.
According to CREB® Chief Economist Ann-Marie Lurie:
“While supply levels have improved from levels seen over the past four months, inventory levels are still well below what we traditionally see in March, thanks to stronger than expected sales activity. With just over one month of supply in the market, the persistently tight market conditions continue to place significant upward pressure on prices.”
To get you started, here are a few things experts say you should plan for along the way.
1. Down Payment
As you set your savings goal for your purchase, your down payment is likely already top of mind. And, like many other people, you may believe you need to set aside 20% of the home’s purchase price for that down payment – but that’s not always the case.
The good news is, you may be able to put as little as 5% down in some situations. To understand your options, partner with a trusted professional who can go over the various loan types, down payment assistance programs, and what each one requires.
2. Initial Deposit
Another item you may want to plan for is an initial deposit. This deposit is always required, and usually 2-5% of the purchase price. Tailoring the initial deposit to the specific situation can help your offer stand out in a bidding war.
So, what is it? It’s money you pay as a show of good faith when you make an offer on a house. This deposit works like a credit. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. It’s not an added expense, it’s just paying some of that up front.
An initial deposit could be the very first check you’ll write toward your purchase. Work with a real estate professional to understand any requirements what is recommended for buyers in your market.
3. Closing Costs
The next thing to plan for is your closing costs. Basically, your closing costs cover the fees for various people and services involved in your transaction. This could be property inspectors, lawyers, etc. The key takeaway is savvy buyers plan ahead for these expenses so they can come into the process prepared.
Bottom Line
Knowing what to budget for in the homebuying process is essential. To make sure you understand these and any other expenses that may come up, let’s connect so you have reliable expertise on what to expect when you buy a home.