How much money should I have saved before even looking into buying a home?

Asked by April, Milwaukee, WI Fri Aug 5, 2011

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Colleen, , Milwaukee County, WI
Fri Aug 5, 2011
I would also like to add that in my opinion it's a good idea to have an emergency fund of at least $1000 saved. (Actually, whether or not you buy a home you should have money saved in a fund like this). You don't want to have a situation where you have to decide between getting your car fixed or paying your mortgage. Or not being able to make a home repair if something should come up. Dave Ramsey has some good advice in his books about establishing such a fund and generally paying down debt. Find them at the library.
2 votes
Justin Ruzic…, Agent, Greenville, SC
Sat Aug 6, 2011
Great question. April, while FHA is one "option" for loans, it should be your LAST option, and REALLY shouldn't be on the table. FHA has higher mortgage insurance costs, it also has greater closing costs, because it is a "risky" loan and because it is backed by our wonderful government who if you didn't know is horrible at managing money. 20% of your homes purchase price should be your goal...if you get to 15% or even 18% and the time is right to buy then I say go for it...BUT please do not just save 5 - 10% and use FHA as your solution....I write on this topic a lot because i have seen way to many people mislead into the belief that 3.5% is enough to purchase a home and own more at…

enjoy the adventure of saving, saving, saving then living life to the fullest!!
1 vote
Troy Miller, Agent, Milwaukee, WI
Fri Aug 5, 2011

You will need to save for several things the biggest will be your down payment. Many first time buyers are getting FHA financing in which you can come in with as little as 3.5% down. In addition to the down payment there will closing costs to make the loan (costs are approximately $2000 to $4000 depending on the lender). Finally there will be some up front expenses once you locate a home you want to pursue which include an appraisal (roughly $400) and a home inspection (around $300).

A good start would be to contact a lender to check your credit and see how much home you can afford based on your current income. They can give more detailed information on closing costs and once you have a price range in mind you will know exactly how much you will need as a down payment. If you don't have anyone you are working with I have several that I've worked with regularly and would recommend.

It is such a fantastic time to buy right now...rates are low, home prices are low and selection is high! Please feel free to contact me anytime if you have any additoinal questions.

Troy Miller
TOTAL Realty
1 vote
Edelrodrigue…, Home Buyer, New York, NY
Sun Dec 18, 2016
Im in Midland, Texas I see questions answered below but nothing regarding typically how much is needed for closing on a VA loan ? How much should I have saved up in Savings?
0 votes
Kris Plechaty, Agent, Menomonee Falls, WI
Sun Aug 7, 2011
Hi April!

First of all, congrats on considering buying a home! It's a opportune time to look into making a great financial investment...your very own house! Rates are low, and houses are just need to have patience and persevere until you find the right one.

How much money you should have saved depends on what type of financing you are looking at. FHA requires 3.5% down, whereas with a conventional mortgage 20% is preferred; if you don't have 20% to put down on a conventional mortgage, you will end up paying PMI (Private Mortgage Insurance) until you have 20% equity in the home. Closing costs will add another $2000 to $3000, plus the additional cost of a home inspection ($300 to $400). A good mortgage lender can help you make sense of this whole process!!

Good luck...please contact me if I can be of help in finding your perfect first new home!!

Kris at First Weber Group Realtors
0 votes
Sat Aug 6, 2011
Great question! It truly depends on what pricepoint you are looking to capture a home for and also your goal of how long you'll keep that home! There are so many great financing options out there, I find that it's best to work with a lender that can give you numerous options to help you meet your goal! Keep in mind choosing the right lender is just as important as choosing the right realtor....! Best of Luck!!
0 votes
Gary Geer, Agent, Antioch, IL
Sat Aug 6, 2011
The amount of money required is dependent on the type of financing you will need to buy. If you use a FHA loan the minimum down payment is 3.5% and you will need additional closing costs to close your deal. You can always ask the seller for assistance if you need it. If you have not been pre-approved for a loan now is the time you need to contact a mortgage professional in your area to find how how much home you can afford.

All the best,
Gary Geer
0 votes
Gerard Carney, Agent, Spring Hill, FL
Sat Aug 6, 2011
Figure at least 20% of the homes price or the price range you hope to search in if you use conventional financing, but if FHA 5% would hold you well for down payment and closing costs!
0 votes
, ,
Fri Aug 5, 2011
Excellent answers and would add you always need "move in" money. You will always need to get something or replace something at the new house.

Answering more directly FHA loans tend to still be the most popluar first time homebuyer program and it is at 3.5% down payment. As an example a $150,000 house would require a $5,250 down payment. FHA does allow for all gift. If a Veteran, you can get a VA loan at 0% down.
0 votes
Jessica, , Virginia
Fri Aug 5, 2011
Hi April,

Typically you need 3.5% of the home’s price or higher for a down payment, an extra 2- 4% for closing cost and some loans require 6 months cash reserves in savings. And once you purchase a home don’t forget about the moving cost and other expenses that follow.

There are other things to consider as well when preparing to purchase a home. See my post below "5 steps to get you in the best shape to purchase a home"
0 votes
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