The cost of buying a home is a top concern for many home buyers, especially first-time buyers. From the down payment and closing costs to the inspection and appraisal, there are many expenses associated with the home-buying process.
So, how much cash should you actually have on hand before diving into homeownership? While recommended amounts vary, there are some standard costs you should plan to budget for. In this post, our realtors at Your Home Sold Guaranteed Realty Elite - The Augustine Team will discuss six costs that impact how much money you should have before buying a house.
- The average down payment can range anywhere from 3 to 20% of the purchase price. Most conventional home loans require anywhere from 3 to 5% down.
- Buyer closing costs include lender origination fees, appraisal fees, title searches, and escrow payments among other expenses. In total, most buyers end up paying between 2 to 5% of the home price in closing costs.
- It’s recommended to have between three to six months of living expenses saved up before buying a home.
How Much Money Should You Have Before Buying a House?
The largest cost for many home buyers is of course the down payment. The average down payment can range anywhere from 3 to 20% of the purchase price. Most conventional home loans require anywhere from 3 to 5% down. However, some programs require as low as zero down, though these are usually reserved for first-time buyers.
Overall, it’s better to aim for a higher down payment. The higher your down payment is, the better your loan terms will be and the less you’ll have to pay each month. If you can afford to put 20% down, you can avoid paying for private mortgage insurance.
After the down payment, the next cost to worry about is closing costs. Typically the home seller pays the bulk of closing costs, but you’ll also have some responsibilities as the buyer. Buyer closing costs include lender origination fees, appraisal fees, title searches, escrow payments, and real estate transfer taxes among other expenses. In total, most buyers end up paying between 2 to 5% of the home price in closing costs.
Inspection and Appraisal
Appraisals are usually required by most lenders, while home inspections are technically optional. However, it’s a good idea to do both. A home inspection costs $300 to $500 on average. The fee for an appraisal can also be anywhere between $300 to $600. If any issues are found with the home during the home inspection, you may need money for the repairs, assuming the seller won’t cover them.
Remodeling and Repairs
Depending on whether or not the home needs any remodeling or repairs, you may need to keep some extra money aside. If you plan any renovations like new paint, countertop replacements, or new flooring, be sure to budget for those costs before moving in. You can usually get the cost of repairs covered by the home seller. If not, they may be willing to lower their asking price to compensate.
It’s a good idea to reserve some money as an emergency fund, rather than putting your entire savings toward a home. It’s recommended to have between three to six months of living expenses saved up before buying a home. This cushion helps cover mortgage payments if you lose your job or have to make unexpected home repairs.
Separate from your emergency fund, it’s a good idea to reserve some extra money as a buffer in case the sale price increases during negotiations, your down payment needs to be higher than expected, or other surprise costs pop up.
A good way to estimate how much money you should have before buying a house is to add together the following expenses:
- Down payment (3 to 20% of price)
- Closing costs (2 to 5% of price)
- Inspection, appraisal, and related fees ($1,000 to $2,000)
- Emergency fund (3 to 6 months of living expenses)
- Remodeling and repairs ($5,000+)
- Extra buffer ($3,000 to $5,000)
A general rule of thumb is to have around 10 to 20% of the home’s purchase price saved in advance, as a minimum. Of course, everyone’s situation is different, which is why it’s crucial to consult with your realtor before you start the home-buying process.
Hire the Best Realtor in Hamilton to Buy a Home Today
If you’re looking for the top realtor in the Grimsby, Burlington, Hamilton, and Oakville areas, look no further than Steve Augustine and Your Home Sold Guaranteed Realty Elite - The Augustine Team. With nearly 20 years of experience, Steve and our team have helped hundreds of home buyers in the Greater Hamilton area.
Clients love working with us because of our unique buyer guarantees, including our Buy it Back Guarantee and Move Up Guarantee. Unlike other realtors, our team offers these guarantees because we believe you should have a truly stress-free home-buying experience.
To learn more about working with Your Home Sold Guaranteed Realty Elite - The Augustine Team to buy a home, call (289) 235-8000 or fill out the form on this page. You can also check out our Featured Listings page to find available homes. Get ready to start packing!