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Purchasing your first Home
I don’t have any money saved to purchase a first Home, is something I hear quite often when speaking to potential first time home buyers. I also hear, I don’t have any money to purchase a home quite often. Well the best and quickest way to financial independence and to accumulate wealth is by purchasing your first home as soon as possible. In many cases your monthly mortgage payment is also lower then what your monthly rent payment would be. So lets look at how much money you need to purchase your first home. Let me start with the short answer first and then lets look at the details. To purchase your first home you need anywhere from Zero to 20 %.
How much money do I have to safe for my first Home?
Zero to 20 %
You can purchase a home with Almost Zero Savings
If you are a veteran and have access to a VA loan you can purchase a home with Zero down payment. There are also other first time home buyers programs that will give you money in many cases grants money to use towards your down payment. With some of these grant programs the lender will ask you for 1 % contribution, meaning you need to have at least one percent of the sales price to bring to closing.
Don’t forget about the Earnest Money. Once you and the seller agree on the terms the purchaser will have to deliver an earnest money. In many cases you can get away with $1000.- to one percent of the sales price. But it is also possible that the seller is requesting a higher earnest money. The earnest money is your money and it will be applied towards the purchase of your first home. The earnest money is showing your good faith to wanting to purchase the home. Your earnest money is protected by many contingencies, but it also protects the seller and shows the seller that you are serious about purchasing their home.
There are so many different combinations of what money you should save to purchase your first home. The grant programs depend on your house hold income. If you make to much money you might not qualify. In the event you do not qualify for any of the first time home buyers programs there is always an FHA loan option.
FHA Loan 3.5 % down payment
One of the most popular loan program for first time home buyers is an FHA loan. If all other programs fail you can get a loan for 3.5 % down payment. The FHA loan program is the most popular program as it allows more flexibility on credit scores then any other programs and also the down payment is relatively low all thing considered.
Mortgage Insurance
With most loans if you are not putting down at least 20 percent of down payment you will be paying a monthly mortgage insurance, not to confuse with the actual property insurance. Having said that there are also some ways to avoid having to pay mortgage insurance. There are options for lender paid mortgage insurances, there are also loan programs that do not have mortgage insurance. For example a VA loan will not have a mortgage insurance.
Best Program for you
There are so many great programs out there and you should work with your Real Estate Agent and your lender to determine what program works best for you. Make an application with a local loan officer and you can determine what works best for you. Apply to find out what mortgage program works best for you. Everyone has different priorities what might be important to me might not be important at all to you. When you apply with the lender, the lender can review all the different options with you.
The Home Buying Process
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