How Much Cash Does a First Time Homebuyer Need?
True or False? First Time Homebuyers can’t get 100% financing.
True or False? First Time Homebuyers pay 20% down or pay Private Mortgage Insurance.
True or False? 100% Financing means you don’t have to pay anything up front.
You may be surprised, but the answer is all three statements above are false. And there is no “one size fits all” answer to how much cash is needed – it depends on a lot of things including:
- Loan programs vary in their down payment requirements. Talk with your Realtor and several lenders to see what will work best for you.
- Closing costs vary. When you buy a home there are a variety of fees that must be paid. Your lender can provide a Good Faith Estimate that will list most, but perhaps not all of those fees and costs, so talk to your Realtor too.
- Mortgage Insurance requirements vary. Some loan programs require the buyer to pay for insurance for the loan. It insures the lender, not you. On FHA loans, it is called Mortgage Insurance Premium, or MIP. On conventional loans, it is called Private Mortgage Insurance, or PMI. FHA loans will have an upfront MIP fee and a monthly MIP charge.
- Don’t forget your earnest money. If you write a check for an earnest money deposit when you submit the offer to purchase, that money is available for your use at closing. While rare, it is possible, such as when the seller pays all closing costs and you borrow 100% of the purchase price, that you can even get some or all of it paid back to you at closing!
For a more detailed discussion on this topic, please go to http://solonglandlord.com/steps-for-first-time-home-buyers-to-take/how-much-cash-does-a-first-time-homebuyer-need.
