Purchasing a home is a lot different than buying just about anything else. To get a mortgage, you must have a down payment and be able to pay closing costs. Understanding what these are and how they are impact the purchasing process will help you during the process of purchasing your first home.
What Is A Down Payment
A down payment is money that you put toward the purchase of your home. In most cases, you are required to pay 20 percent of the purchase price prior to closing. However, there are some loans that do not require a down payment or require only 10 percent down. If you do not have at least 20 percent to put down on your home, you may be required to purchase additional insurance to secure the loan, which is also known as “PMI Payment”. FHA Loans you can do as little as 3.5% down!
What Are Closing Costs
Closing costs are costs related to the closing of your home. Common closing costs include property taxes for the first year and homeowners insurance payments. Attorney fees, loan origination fees and other document fees may also apply depending on what state you live in. Home buyers can expect to pay anywhere from $2,000-$6,000 depending on where you live.
Why Do You Incur These Costs
Banks require a down payment because you are less likely to walk away from your home after such a significant investment. It also shows that you are serious about paying your mortgage for the next 30 years. Closing costs are used mostly to pay for taxes and insurance. First time home buyers may be eligible for assistance with these costs.
There is a lot to think about when purchasing a home. Make sure that you have sufficient savings for a down payment and any closing costs. Planning ahead now will ensure that you get the house of your dreams when you are ready to buy. If you are considering buying a new home, and would like to speak to an experienced, local real estate agent, contact Henderson Properties today!