How Much Do You Need to Save for a Down Payment?
Updated: Apr 25, 2023
Saving for a home is top of mind as you set out to buy a home. But do you know how much you’ll need to save? I am going to break it down in this video.
If you’re planning to buy a home, knowing what to budget for and how to save may sound scary at first. But it doesn’t have to be. One way to take the fear out of budgeting is understanding some of the language you hear thrown around. And to do that, turn to trusted real estate professionals....good thing you know one. In this video I am going to review Cash To Close (CTC), down payment, and closing costs on a $500k purchase. This is just an example and amounts are not exact, but will give you an understanding of what to expect.
Down Payment is the amount you pay towards the purchase of a home. It could potentially come from a retirement account such as a 401k or even as a gift from a family or friend. The amount varies depending on the type of loan, ranging from as little as 3% to more than 20%. The right amount depends on your current savings, what loan you qualify for and your home buying goals. I'm going to use make an assume 5% down which is $25k
Closing Costs are a collection of fees associated with the purchase and sale of a home, such as taxes, title insurance, appraisal, lender fees, and other services carried out during closing. These costs can amount to 2% to 5% percent of the mortgage. Did you know that your Realtor could negotiate on your behalf to have the seller help pay your closing costs in some instances?
CASH TO CLOSE (CTC) is how much money you need to close on your property, and is the sum of your Down Payment and Closing Costs. So, Down Payment + Closing Costs = CASH TO CLOSE
To help understand your options, I partner with professionals to go over the various loan types, down payment assistance programs, and what each one requires.
The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have.
Bottom Line
Budgeting for your home purchase doesn’t have to be scary. Partner with a local real estate advisor so you’ll have an expert on your side to answer any questions you have along the way.