How Much does it actually cost to buy a home?

Do you want to buy a house but think it is out of your reach financially? Well, you’re not alone. A major mortgage company recently did a survey that revealed that the number one reason that people don’t pursue their dreams of home ownership is because they think that they have to have 20% down. I was absolutely shocked when I heard that! What if I told you that you could quite literally buy a home for less out of pocket than you’ll spend furnishing it? Well buckle your seat belts, kids because it’s true and I’m about to tell you all about how to do it.

Use the right loan – Yeah, you’re parents or grandparents probably purchased their home with a 20% down Conventional loan. But, just like everything else lending has changed to meet the need of its current consumers. With options including 10% and 5% down conventional loans, a 3.5% down FHA loan, in-house portfolio loans at 3% down, all the way to no money down on USDA and VA loans the options are endless! The requirements will vary between loan types. Your lender and Realtor will help you figure out which is best suited to your financial needs and goals.

Cut out closing costs – So we’ve learned that we can buy a house with little to no down payment, but what about closing costs? Closing costs are what the lender charges to procure your loan. Each loan type is going to have different charges, but generally closing cost run between 2% and 3% of the purchase price. How can we lessen the blow of those costs? Ask the seller to pay, of course! It’s very common to request that the seller pay some or all of your closing costs. How much you request generally depends on your needs. But don’t worry; your lender will be able to tell you how much you’ll need to ask for!

Grant Money – Every year grants are rolled out by different lending institutions. Normally the funds allotted for the grants are limited which means there’s only so many individual grants they have available to give. While others are just programs lenders run until they stop. But for the most part, you’ll have to get ‘em while the gettins’ good! They’re not always available, though, so talk to your realtor and lender about what’s available and how it can help you!

Upfront costs – You do need some money to buy a house, even if you use a no money down loan and get your closing costs covered by a grant or seller! There are costs like home inspections, earnest money, and appraisals.  A typical whole home inspection is around $300 to $500, earnest money is a negotiable amount that is an upfront deposit that gets applied to purchase at closing (average in this area starts around $500), and sometimes a lender will have you pay for the appraisal upfront which is around $400 to $500.

So let’s put all of this information together into some actual numbers. I’ll use an example from a recent sale that closed. My buyer got a home under contract for $102,000. They used a 3.5% down FHA mortgage. They asked for $3,000 in seller paid closing costs and they qualified for a $2,000 grant from their lender.  They ended up bringing just over $2,100 to closing. Their upfront costs were about $300 for a home inspection and $500 in earnest money. So total out of pocket was right around $2,900. To buy a house!  So the question isn’t how much does it cost to buy a house, it’s how much do you want to spend!

Contact us today at 937.378.3800 so that we can talk about your goals and help make the dream of home ownership become a reality for you!