Taking the Fear out of Saving for a Home

Abstract

One way to take the fear out of budgeting is understanding some of the costs you might encounter. Down Payment Saving for your down payment is likely top of mind as you set out to buy a home. An article from the Mortgage Reports explains why that's not always the case: "The idea that you have to put 20% down on a house is a myth.... The right amount depends on your current savings and your home buying goals." To understand your options, partner with a trusted real estate professional to go over the various loan types, down payment assistance programs, and what each one requires. Closing Costs Make sure you also budget for closing costs, which are a collection of fees and payments made to the various people involved in your transaction. Bankrate explains: "Closing costs are the fees you pay when finalizing a real estate transaction, whether you're refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it's important to be financially prepared for this expense." The best way to understand what you'll need at the closing table is to work with a trusted lender. It's not an added expense - it's paying a portion of your costs upfront. Realtor.com describes how it works as part of your sale: "It tells the real estate seller you're in earnest as a buyer, .... Assuming that all goes well and the buyer's good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront." Keep in mind, an EMD isn't required, and it doesn't guarantee your offer will be accepted.