Are you saving money to put towards a down payment on a new home? In 2019, there were 5.34 million homes sold in the United States! The sheer number of sales each year means there are lots of opportunities to buy your dream home!
If you are buying your first home, you may be unsure how much money you should bring to the table for your purchase. Read on to learn how much money should you save to buy a house!
Buying a house is one of the biggest purchases of your life. This can make the process a stressful time in your life despite the excitement of finding your new place.
Your down payment is the amount of money you are willing and able to put down toward the total purchase price of your home. Your sales price, down payment, and the interest rate on your loan, are the three important figures that govern your monthly cost.
Although many people encourage buyers to have a down payment of at least 20% to put towards your home’s purchase price. Others advocate for a smaller down payment or even no down payment, as long as you can afford your monthly mortgage payment.
When you are saving for a house, be sure to remember that there is extra money you will need to bring to the closing table beside your down payment. Closing costs are the costs that are typically paid by the buyer for finalizing the paperwork and signing off on the loan.
Depending on your real estate contract, you’ll either be on the hook for them 100%, or you can choose to negotiate down the amount due on your end at closing. These monies are separate and apart from the down payment, which is a clear percentage of the selling price on your property.
You can speak to mortgage companies about how they charge this and what to expect on your particular transaction.
Private Mortgage Insurance (PMI)
Private mortgage insurance (PMI) is one of those sets of funds that is charged for the outstanding note on your home. The good news is that not every buyer must pay PMI! If you are willing to put down a minimum deposit of 20% of the purchase price, you won’t need to pay it.
If you opt to forego a 20% down payment at first, you can always choose to have your home appraised later to show your lender you have at least 20% equity in the home. Depending on your seller’s Note, they may allow you to receive an inspection from a licensed appraiser to provide an appraise.
Wrapping Up: How Much Money Should You Save to Buy a House?
When you ask, ‘How much money should you save to buy a house?’, the answer may surprise you. While some will recommend a down payment of 20% minimum for the purchase of a home, that’s not a hard and fast rule.
Before you begin your home search, consider what you can afford and how much money you can put down to fund the purchase. Check out our blog section for other great posts about personal finance and health!